Hiren Ved, director and chief investment officer (CIO), Alchemy Capital, expects the 30-pack Sensex, which hit 70,000 for the first time on December 11 morning, to hit the 1-lakh mark by Christmas 2025.
The broader Nifty recently topped 21,000 and the recording-smashing spree is unlikely to halt anytime soon, with continuous domestic inflows and resurgence in foreign investor buying aiding sentiment.
“Between Diwali and Christmas 2025, it is possible for the Sensex to hit 1,00,000,” Ved said in an interview to Moneycontrol. “By the next financial year, IT and banks will take leadership.”
If this happens, the Sensex will deliver 43 percent returns in about two years, compounding at about 20 percent a year, from current levels. The expectation is much higher than 13 percent compounding seen over the past 20 years. Twenty years ago, the Sensex traded near 5,100.
s the market expensive now? Not really
Ved sought to allay valuation concerns, saying that even with the indices at all-time highs, the market is not expensive compared to historic valuation. The market has lagged the profit growth of India Inc by a wide margin in the past three years, he said. This keeps the valuation within the comfort zone.
The data shows that the aggregate profit of top 500 companies was around Rs 4 lakh crore before the coronavirus outbreak in 2020. As of September-end 2023 annualised, it is around Rs 11-12 lakh crore. It means profits have gone up about three times but both Nifty 500 and Nifty have gone up only 87 percent and 75 percent, since February 2020.
“One year forward for the Nifty is 17-and-a-half times, which is exactly your 5-year average, or 10-year average,” he said. “I think that if this bull market has to continue, then at some point in time, the large caps have to also start picking up.”
In comparison to Nifty Smallcap 100 that has zoomed 45 percent and Nifty Midcap 100, which gained 38 percent in the same period, Nifty 100 and Nifty 50, both representatives of the largecap segment, have risen 13 percent each. This shows their underperformance against the broader market.
Banks, IT, the sectors to watch
Ved said banks and information technology, which have nearly two-thirds of weight in the Nifty and the Sensex, are likely to take leadership position now. He expects concerned about compression of banks’ net interest margins (NIMs) to ease next year. Greater adoption of artificial intelligence (AI) would benefit IT firms, which have been hit hard as businesses cut spending.