Markets are rallying. Few investors are excited about the rally in small-cap and mid-cap stocks. What a start of the month it’s been!
Time and again we spoke about the golden opportunities stock markets have thrown at us, yes, even during times of market correction.
Now since markets have started to bounce back, many investors are asking us: Can Sensex reach 40,000 in 2019?
To answer this, we do expect a few headwinds or difficult phases for the markets. This can be due to the uncertainty around the elections and trade war outcome. Even oil prices and micro indicators such as inflation, fiscal deficit needs to be watched out for.
But we are still optimistic about the times ahead. Allow me to explain why?
Why 2019 is a good year for Sensex?
We are seeing the positives such as earnings revival led by policy reforms, improvement in asset quality, and recovery in corporate capex.
We all know that Sensex is an average reflection of the prices of the top 30 well-established and financially sound companies listed on the Bombay Stock Exchange. So if the Sensex touches 40,000, it essentially means the corporate earnings of those 30 companies forming the index is improving.
The revival of corporate earnings is seen as one of the major drivers of stock markets. Subdued corporate earnings in the first 3 quarters of 2018, can be attributed mainly to high input costs for manufacturing companies and high credit cost for banks. We strongly believe that these factors have already started reversing.
A strong consumption-led demand growth, growing economy, a huge consumer market, rising corporate earnings to positive macro-economic factors, India has it all.
In our last few mailers, we already spoke about the sectors that will outperform in the coming years, the reforms that will RE-FORM your portfolio and why this is the golden time to invest.
India is today the fastest growing economy in the world and given the current rate of growth, many analysts even predict that India will become a superpower by 2030.
But when a country becomes a ‘Superpower’?
Superpower is a term used to describe a country that has a major influence on policies and decisions, on a world level. When a country is powerful economically, militarily, and has the latest technology and excellent international relations, it is deemed as a superpower. And if India becomes a superpower, Sensex may be between 40,000-50,000 levels.
But till then, to answer your question: How the Sensex will perform in 2019?
According to a report by Morgan Stanley, the stock markets could start pricing in stronger poll outcome in coming weeks and Sensex could touch 42,000 as early as December 2019.
The brokerage expects earnings growth to accelerate to 7-10 per cent in FY19, and 23-25 per cent in FY20.
India is all set to become a $5 trillion economy. And in this process, many opportunities will grow 10-20-50 times or even more in the next few years.
But the question remains: Are you all set to take your share and grow your wealth while India grows? The opportunities are many, all you have to do is invest in superior quality companies and hold on to them.
We would recommend business with high competitive moats in form of strong business fundamentals, attractive valuations, sustainability and adhere to corporate governance policies.