Sensex at 1,00,000!!! Is this Going to be a Reality?

“Chris Wood of Jefferies sees Sensex reaching 100,000 points by late 2026”

“Morgan Stanley sees Sensex at 1 lakh by 2027”

Why is it so important for common people like us to keep regular track of the growth in Sensex?

What impact will it have on commoners like us and also on our lifestyle?

Let’s first understand what Sensex really is.

The term Sensex refers to the benchmark index of the BSE in India. It truly reflects the Indian Stock Market Movement.

So generally, when there is a rise in the Sensex, it automatically means there is a growth in share value as well. By this, we have come to know that the value of shares invariably depends on the Sensex. 

Generally, when we hear such statements from renowned research agencies such as Jefferies and Morgan Stanley. The first thought that comes to our mind would be how these agencies are able to predict or anticipate such things.

How do they substantiate their theory? 

It’s a known fact that individual investors like us can never get into such deep-dive research like those research agencies which does giant research.

But still, we can do a reality check ourselves to come up with our own answer logically and look to take the wise Investment Decision based on it.

We will not just look at macroeconomics but will also play a numbers game to support the same.

The Historic ride:

Before even we debate as to whether Sensex will reach 100K it is worth seeing this journey all through these years. 

Let’s discuss the x-factors and the contributing factors that have led to this milestone.

• April 1-1979-The Sensex debuted with a base value of 100
• 1990– The first thousand-Indian growth story starts to kick in with many corporate starting to grow.
• 1992-The journey from 1000 to 4000. Probably the second most bullish period of the Indian Stock market. Then came Mr. Harshad Mehta taking back the index to levels of 2000
• 1999– First major milestone of 5000.-Growth fuelled by a rebound in agriculture and allied sectors and the election of the first full-time non-congress government 
• 2006– The first time Sensex achieved the 5-digit mark, 100 times the growth in little over 26 years Staggering!
• 2007-Sensex reaches 20K a double from 10K levels in just 18 months from making the previous high. This was on the back of huge buying from FII and increased retailers.
• 2008-The year of fall. Sensex nosedived to 8000 levels on the impact of the Subprime Mortgage crisis. 
• 2014-Sensex reaches 25000 bouncing back from the lows of 2008. Over 3X returns in a steady 6-year period. The fall of the UPA government and the rise of the Modi-led BJP government was cited as one of the reasons for the bull run.
• 2019-40K scaled in little over 41 years. Yet another peak took out. India continues to flourish as the threat of the US-China Trade war escalates.
• 2020-The Covid slump. Fall from 42k to 25K wiping all the substantial gains made in over 4 years.
• 2021-Feb-Sharp rally post-Covid saw Sensex double from 25K levels to 52K in less than 12 months.
• 2021-Sept-Sensex breaches the 60000 mark for the first time fuelled by the China +1 narrative.
• 2022 May-June-Due to the Russia-Ukraine crisis Sensex was unable to sustain 60K levels and broke down until 51K.

So, from these pieces of information, we can see that the growth in Sensex depends on various economic and political conditions.

Pheww!! Truly a roller coaster ride indeed. 

Imagine that if you had invested Rs 1 lakh in the Sensex in 1984, it would have turned into 1 crore in the next 3 years, i.e until 2015. 

If you compare them with mutual funds, they have also given similar returns. 

UTI Mastershare Unit Scheme completed its 33 years in 2019 and it offered a CAGR of 15.627 %. 

This would have turned your 1,00,000 in 1986 into 1 crore today!!

The See-Saw Sensex:

Below are the returns of Sensex over the years since its inception. So looking at this you can easily say this is a good instrument and that it has compounded year after year.  

But when the market heavily crashes would you as an investor be in the same mindset as earlier?

Year	Close	CAGR(Calculated as on the last traded price of the particular year)
1979	100
1980	148.25	0.4825
1981	227.72	0.536054
1982	235.83	0.035614
1983	252.92	0.072467
1984	271.87	0.074925
1985	527.36	0.939751
1986	524.45	-0.00552
1987	442.17	-0.15689
1988	666.26	0.506796
1989	778.64	0.168673
1990	1048.29	0.346309
1991	1908.85	0.820918
1992	2615.37	0.370129
1993	3346.06	0.279383
1994	3926.9	0.173589
1995	3110.49	-0.2079
1996	3085.2	-0.00813
1997	3658.98	0.185978
1998	3055.41	-0.16496
1999	5005.82	0.638346
2000	3972.12	-0.2065
2001	3262.33	-0.17869
2002	3377.28	0.035236
2003	5838.96	0.728894
2004	6602.69	0.130799
2005	9397.93	0.423349
2006	13786.91	0.467016
2007	20286.99	0.471468
2008	9647.31	-0.52446
2009	17464.81	0.81033
2010	20509.09	0.174309
2011	15454.92	-0.24644
2012	19426.71	0.256992
2013	21170.68	0.089772
2014	27499.42	0.298939
2015	26117.54	-0.05025
2016	26626.46	0.019486
2017	34056.83	0.27906
2018	36068.33	0.059063
2019	41253.74	0.143766
2020	47751.33	0.157503
2021	58253.82	0.219941
2022	60840.74	0.044408
2023	60431.84	-0.00672

Overall CAGR:16.47%

Let’s do some simple math based on these scenarios and understand the key takeaways.

The data points marked in red indicate some slump in the Sensex. It may also mark some major setbacks to the world in its entirety or to India in particular. 

During that whole period, we as a country have underperformed. Any investment made until then would have tanked. 

The fall of 52% in 2008 was no small and may have wiped out all the weak hands from the market. But intelligent investors like us don’t worry Do we.?

In contrary to the periods in red, just look at the years marked in green immediately succeeding the red ones. 

We see stellar returns and the markets have erased all the losses and have rebound from the lows, scaling newer heights. These were not only a ‘V-shaped recovery but the run-up persisted for more than a year.

The Numbers Game.

Now that we saw that Sensex’s returns over a longer time frame are 16% on average, let’s plot different scenarios as to when we can expect the milestone of 100,000 to be taken over.

Scenario 1:

Considering the current growth rate of 16% annually:

Year	Starting Value(Feb 2023)	Assumed Rate of Return(%)	Future Sensex
2023	60431	16	70099.96
2024	70099.96	16	81315.95
2025	81315.95	16	94326.51
2026	94326.51	16	109418.7

At the current rate, we are going to reach our target in the next 3 years, which turns out to be a very good instrument to invest in.

Scenario 2:

Considering a modest return of 5-7% for equities as seen from global and Indian pieces of evidence, let’s see how the numbers add up.

Year	Starting Value(Feb 2023)	Assumed Rate of Return	Future Sensex
2023	60431	7	64661.17
2024	64661.17	7	69187.45
2025	69187.4519	7	74030.57
2026	74030.57353	7	79212.71
2027	79212.71368	7	84757.6
2028	84757.60364	7	90690.64
2029	90690.63589	7	97038.98
2030	97038.98041	7	103831.7

So even a 7 % return helps us attain our goal 7 years from now, which is in 2030. Not bad isn’t it?

Scenario 3:

The case of the unknowns. During all these years we have seen several geopolitical issues, pandemics, and other alarming situations during which the market has reacted negatively. 

So what makes it to reach 100,000 from those levels?

Let’s say we hit the Covid lows of 25000 and assume growth at the annual CAGR of 16%

Year	Starting Value(Feb 2023)	Assumed Rate of Return	Future Sensex
2023	25000	16	29000
2024	29000	16	33640
2025	33640	16	39022.4
2026	39022.4	16	45265.98
2027	45265.984	16	52508.54
2028	52508.54144	16	60909.91
2029	60909.90807	16	70655.49
2030	70655.49336	16	81960.37
2031	81960.3723	16	95074.03
2032	95074.03187	16	110285.9

We hit our landmark another 8 years from now. In other words, Sensex has given more than 4X returns in 8 years! 

When the fall is huge, redemption is also faster. So, in case such a situation arises, we can start viewing these lower index levels as opportunities instead.

These illustrations indicate only one common underlying fact i.e., the Indian Equity Market is bound to go up in the longer term. We have had so many geopolitical issues, conflicts, and pandemics. 

But still, we are delivering the goods, thanks to our country’s healthy growth outlook.

What is working out for India?

Ok, so it looks like that some way or the other we are going to breach the magical figure of 100K in the future.

 But what substantiates this claim? What does the Macroeconomics of India look like? 

Why will we never become a Srilanka or a Pakistan which are in deep economic crisis? By knowing this

India to be 3rd largest economy by 2027: 

Per Morgan Stanley, India is set to add $400 bn every year. At this rate we will be $11 trillion over the next decade, making it the third largest economy in the world after US and China.

China Plus One Narrative: 

The government has incentivized the tax structure and this has improved the ease of doing business. 

The trade tensions between US and China have further contributed to the growth of industries in India. Post Covid the China+1 narrative has kicked in and this can result in a spurt in the manufacturing and Pharma industries.

More disposable income: 

The Income of people in India is also increasing. The Estimated Number of Households by Income Class data shows that there is a radical shift in the earnings of the people from the 1985-86 period to the 2009-10 period. 

Higher earnings mean higher spending and this will result in an uptick in the economy. 

Rising Capex:

 Increasing Capex by companies means more infrastructure growth and more jobs. This will also lead to a higher rate of employment and will put money into people’s pockets. 

Morgan Stanley has also said that India may become the world’s Factory owing to its corporate tax cuts, and investment incentives.

Digital Economy: 

Thanks to Aadhar, India has created biometric IDs, and proof of residence and has been instrumental in digitizing financial transactions, among other benefits. This digitalization has led to lowering credit costs, making loans more accessible and affordable for both consumers and businesses

How to be part of this Growth Story?

Multinationals are now buoyant about the prospects of investing in India and it is high time that we take cognizance of all these and reward ourselves. 

What it takes to be part of this growth story of India and what should be the strategies to build long-term wealth? Let’s discuss this.

Magic of Mutual funds:

Mutual funds are pretty good instruments that specially cater to long-term investors. Actively managed mutual funds have fared even better when compared to passively managed funds.

When the Sensex reaches our designated target in say 3 years, the Sensex would have grown by a CAGR of ~ 18% and the same would have grown by 11% over 5 years. 

Likewise, Mutual funds can also replicate the same or some of them fare even better.

Take for instance Nippon India Small Cap Fund which has been outperforming the benchmark index handsomely by a whopping margin of 8%. 

This fund has been one of the star performers in the last 10 years and has created wealth at a CAGR of 24% in the same period.

Courtesy: Moneycontrol.com

Though past performances cannot be accounted for a fund’s future growth a 24% CAGR would have made this probably the best return on your investment. 

However, it is always important to keep track of the changes happening at the fund houses. Periodic evaluations of mutual funds are necessary to generate handsome returns in the longer run.

Timing the Market vs Time in the market:

This adage has been proven right time and again. None in this world can predict the market and we retailers aren’t an exception in this either. 

Research shows that those who stay invested over the long run in a well-diversified portfolio will generally do better than those who try to profit from turning points in the market. 

A classic example is the Sensex returns over a longer period that was illustrated in the beginning.

When to invest in Equity and when not to:

To leverage all the above growth aspects of India, the only way to make some gains for ourselves is via investing in equity.

 This can be via an index fund or an actively managed mutual fund as both of them have given good returns over a longer time as explained earlier in this article. 

But at the same time, it is also not worth investing entirely in equity markets if your financial goals are lesser than 5 years away. 

Just in case, if there are any rude shocks to the equity market the portfolio may be down and you may miss out on achieving the target corpus for your goals. 

So for a goal of more than 5 years equity investing is a must and can be avoided for goals lesser than 5 years.

Fear of the Knowns and the unknowns: 

The knowns are some of the fears that we are aware of and ones that we can understand. These are some of the risks which may negatively impact our portfolio. 

Instances like rising inflation and change in repo rates by the apex banks are some of the risks. 

Though the markets react negatively to such things, we have seen that all of these can be negated in a short period and so we should stay put.

The fact is these unknowns are the ones that cause a major disruption in the financial markets, like the Covid crisis, Russia Ukraine war, or the Subprime crisis. 

But we all know how we navigated through the rough seas and turned profitable in short durations. So why worry during all such distress periods as we have magnificently recovered and made new heights time and again? 

Here is a video to help you out regarding the steps to be taken as a Retail Investor during Sensex Crashes.  Worst Sensex One-Day Crashes in History – The Do’s & Don’ts–

Bottomline:

We as an economy are poised to grow and this decade is India’s decade. 

Eventually, we are going to breach the 1,00,000 in Sensex and may go even further, creating newer highs. 

Let’s be patient and travel together in this decade of development of India.

Happy Investing!!