How much can Dalal Street indices rise in the coming years? Christopher Wood of Jefferies thinks that a target of 1,00,000 is "now eminently achievable" for the Sensex on a five-year view.
In his Greed & Fear report - Wood's weekly notes to investors - the Global Head of Equity Strategy at Jefferies said the target is basis the assumption of a trend of 15 percent earnings per share (EPS) growth and that a five-year average multiple of 19.4 is maintained.
Chris Wood, as he is widely known, expects the Sensex to hit the 1,00,000 mark in FY27 or "sometime in late 2026". This may seem an aggressive assumption, said Wood, but India has always been a stock market for growth investors with the multiple to go with it.
The remarks from the veteran fund manager come at a time when benchmark indices Sensex and Nifty50 have receded about six percent from all-time highs, touched in October 2021. In January 2022, both came within 1.5 percent of the peaks but reversed course once again.
Sensex 5-year target level assuming 19.4X PE
| Year (end-March) | EPS | YoY (%) | Sensex @ 17x PE | |
| FY21 | 2,196 | (10-year average) | (Five-year average) | |
| FY22 | 2,308 | 5.1 | ||
| FY23 | 2,752 | 19.3 | ||
| FY24 | 3,227 | 17.3 | 54,849 | 62,456 |
| FY25 | 3,711 | 15 | 63,077 | 71,824 |
| FY26 | 4,268 | 15 | 72,538 | 82,598 |
| FY27 | 4,908 | 15 | 83,419 | 94,988 |
| FY28 | 5,645 | 15 | 95,932 | 1,09,236 |
| FY29 | 6,491 | 15 | 1,10,321 | 1,25,621 |
| Source: Bloomberg, Jefferies | ||||
Wood said the strong growth outlook explains the continuing resilience of the stock market despite perceived high valuations. The Nifty now trades at 20.5 times one-year forward earnings, he said.
True, the stock market has corrected by 5.1 percent since peaking in October, but the market would have suffered much more were it not for continuing healthy inflows into domestic mutual funds, the veteran fund manager added.
Here are some other highlights from the Greed & Fear note:
"In a G7 world where value investors may finally enjoy an extended period of outperformance overgrowth 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.
He said the domestic demand focus will certainly be maintained in Jefferies' long-only Indian portfolio, which remains broadly unchanged since its inception in July 2021.
Jefferies' India long-only equity portfolio contains 16 stocks, with Reliance Industries and ONGC having the maximum weightage.
| Sector | Stock | Weightage (%) |
| Financials | ICICI Bank | 7 |
| HDFC | 7 | |
| SBI | 4 | |
| Bajaj Finance | 7 | |
| ICICI Prudential Life | 7 | |
| ICICI Lombard General | 8 | |
| Energy | Reliance Industries | 10 |
| ONGC | 10 | |
| Real estate | Godrej Properties | 8 |
| Century Textiles | 5 | |
| DLF | 4 | |
| Auto | Maruti Suzuki | 5 |
| Infra | L&T | 5 |
| Consumer | Jubilant FoodWorks | 5 |
| Material | Tata Steel | 4 |
| Logistics | Concor | 4 |
| Source: Jefferies | ||
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