Indian Market: Sensex growth and target of 1 lakh, BSE Sensex reached 80,000 from 70,000 in less than 7 months, Considering the all-time record CAGR of 16 percent of India’s leading stock index, the Sensex may reach the 1 lakh milestone by December 2025. Considering the base value of the Sensex of 100 in April 1979, the Dalal Street barometer has grown 800 times in 45 years, growing at a compound annual growth rate (CAGR) of 15.9 percent. If the Sensex continues to grow at the same pace of 15.9 percent annually, we will achieve the target of 1 lakh by December next year. Remarkable growth The Sensex has risen 10 per cent in just 20 trading sessions, the fastest rise in its history. Although this rapid rally is driven by macroeconomic fundamentals, expectations of a rate cut by the US Federal Reserve and pro-growth government policies, the speed at which the index is scaling new barriers has made sceptics think it is too good to believe. It rose from 70,000 to 80,000, the fastest 10.00 point rally in less than 7 months or 139 sessions. Year-to-date, the Sensex has gained around 11.06 per cent. When will the Sensex cross 1 lakh?
“Based on the historical compounded annual growth rate (CAGR) of the Sensex, which is around 14-16 per cent, one can mathematically estimate that within 1.5 to 2 years, the Sensex could reach the 100,000 mark,” said Jigar S Patel, Senior Manager and Technical Research Analyst at Anand Rathi Shares & Stock Brokers. However, it is important to note that 2024 is a leap year and historically leap years often coincide with market corrections. The Indian market has already faced massive volatility this year due to the election results. Additionally, the upcoming budget announcement could increase potential volatility, which could lead to volatility or even a minor correction ahead of the 2024 budget. On the technical front, the 21-day exponential moving average (DEMA) is around 77,837 and the 50-day exponential moving average (DEMA) is around 76,150, both significantly lower than the current market price of the Sensex. This discrepancy suggests that a pullback to around 76,000 could occur as part of a reversion to the mean. Moreover, the long-short ratio of foreign institutional investors (FIIs) for index futures is between 80 and 83 per cent, indicating strong optimism. Such a high level of bullish sentiment typically precedes a market correction. For investors, a prudent investment strategy would involve profit booking at higher levels. “Given the likelihood of a market correction, it would be prudent to consider booking at least 30-40 per cent of profits if the Sensex tests the 81,000-81,500 range. This approach allows investors to lock in profits and be ready to reinvest after a significant correction, ensuring they can capitalise on subsequent market movements,” Patel suggested.
