Sensex may continue its stellar run and hit a staggering 1,00,000 points during the financial year 2027 or sometime in late 2026, said Jefferies’ Global equity strategist Chris Wood in his weekly Greed & Fear note. Although Chris Wood said that his target for the benchmark index may seem as an “aggressive assumption”, he added that it “is now eminently achievable on a five-year view assuming a trend 15% EPS growth and that a five-year average multiple of 19.4 is maintained”. BSE Sensex started Friday’s trading session at 58,918; it is down 5.6% from an all-time high of 62,245 points.
India — growth investor’s market
Chris Wood has pinned the 1,00,000 target on Sensex in a week in which Finance Minister Nirmala Sitharaman presented the Union Budget for the next fiscal year, focusing on capital expenditure. India is the place for stock investors focusing on growth, Wood said. “In a G7 world where value investors may finally enjoy an extended period of outperformance over growth, until at least the Fed performs another U-turn, India should be a prime object of focus for growth-oriented equity investors, be they Asian and emerging market investors or global investors,” he said.
Resilience in equities
Although domestic markets have seen a sharp correction recently, Wood remains confident. Foreign investors have sold $4.8 billion of equities year-to-date. “But the market would have suffered much more were it not for continuing healthy inflows into domestic mutual funds. Net inflows into domestic equity mutual funds totaled $9.3 billion in 4Q22 and $22.2 billion since March 2021,” he added.
Indian stock markets, in Chris Wood’s view, may prove to be surprisingly resilient in the face of rising interest rates. He draws this conclusion from seeing the housing cycle that picked up after a seven-year downturn. “This should translate in due course into a broader capex cycle which should be earnings positive and mean the stock market will prove to be surprisingly resilient in the face of rising interest rates,” he said. Stamp duties on a country-wide level are up 59% on-year in April-November — a strong indicator of the improvement in the broader housing/property cycle.
On the earnings front, the Jefferies global equity strategist expects strong growth. Wood said that the consensus earnings growth forecast for the MSCI India this year is 20.3% and Jefferies’ India office is forecasting 19.2% earnings growth for Nifty next fiscal year.
Threats ahead
US Federal Reserve’s tightening of policy measures and oil prices are the key concerns for Indian markets. Chris Wood said that it is important to note that the inflation problem is primarily an American and G7 one, not an Asian one. Oil prices, however, are seen as a concern by Chris Wood. “Still GREED & fear hopes that the Indian macro story will prove to be more resilient to a rising oil price than has been the case in previous cycles,” he said. India’s high foreign reserves of $634 billion strengthen Wood’s view.
Obvious risks of further corrections in India have not been ruled out but Chris Wood remains firmly of the view that such externally driven corrections are buying opportunities. “If the current housing upturn proves to be the lead indicator of a broader private sector capex cycle, as was the case in 2002-03, then India should once again become one of the best performing stock markets in Asia as it was between 2003-2007,” he added.
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