Sensex, Nifty will continue upward march: experts

The Indian stock markets reached new record highs on Friday as S&P BSE Sensex rose above the 31,000 mark while the Nifty50 comfortably climbed the 9,600 peak. The Sensex is up more than 16 per cent so far in 2017 while the Nifty 50 has risen a little over 17 per cent in the same period.

And there is no 'correction' in the offing, as, according to analysts, technical indicators suggest a continuing rally for benchmark indices which can take the Sensex towards 100,000 and the Nifty50 towards 22,000-38,000 in the next 5-7 years, reports Moneycontrol, with the caveat that these numbers are based on certain assumptions and elevated targets should always be taken with caution.

''We are working with a target of 20,000-22,000 on Nifty by 2022-2024. Government policy and reforms initiated by the Modi government would normally take 5-6 years to give results so we are in that process and with introduction of GST, government focus on Make in India, ease of doing business, cleaning of bank assets, making India digitial, financial inclusion, and a cashless economy for which demonisation was implemented all would pave way,'' A K Prabhakar, head of research at IDBI Capital, told Moneycontrol.

''India would be 4 trillion dollar economy by 2024, and by 2021 our Nifty EPs could be around 810 in the next leg of growth and if euphoria hits the street then valuation can go anywhere,'' he added.

For Sensex, the rally has also just started. The advance from 1979 in the Sensex is a super cycle advance and we are now in the sweet spot of that advance, Mark Galasiewski of Elliott Wave International told business news channel ETNow.

''I gave a 15-year forecast of Sensex 100,000 by 2024 and I see no reason to change that or update that forecast because the actual form of the advance is from a technical perspective which is confirmed from April 2009. The Sensex and Nifty have tripled since that time and they can more than triple again over the next several years,'' he said.

The next leg of the rally will be led by earnings growth in India which has remained muted for the past 4-8 quarters. With the economy on the mend, the target is not unachievable but will require a lot of things to move in a similar direction, the Moneycontrol report points out.

With the implementation of goods and services tax (GST), most analysts are factoring in higher earnings growth for large cap companies which are likely to benefit the most from the 'one nation one tax' rule.

''Going by the statement of Mark (Galasiewski), the move from 30,000 to 1,00,000 at Sensex could take seven years (2017 to 2024). Numerically, this means average annual returns of close to 18 per cent for the next seven years,'' Gaurav Dua, head of research, Sharekhan told Moneycontrol.

The 16-18 per cent average annual returns from the Sensex can be explained by the average growth rates of around 14 per cent in India's nominal GDP (real GDP + inflation) for the past four decades.

''The top Indian companies constituting the Sensex naturally tend to grow at relatively higher rates than nominal GDP which eventually drives 16-18 per cent annual average gains in Sensex over the longer period of time,'' explained Dua.

As for the Nifty index, it has been oscillating in a rising channel 2009 onwards and the February 2016 low was right at the support line of the channel. Currently, it is approaching the upper end of the channel in the range of 10,600-10,700.

''In the immediate medium term, the target that I am looking at is 10,600-10,700 on Nifty. If this resistance of 10,700 is taken out on a closing basis, then we could be looking at a much steeper target of 12830,'' Aditya Agarwal, technical research analyst – YES Securities (India) Limited told Moneycontrol.

''However, failure to take out 10,700 on a closing basis can trigger corrections, dragging it back gradually to the lower end of the channel. Therefore, the near-term target that we have on Nifty is 10,600-10,700,'' he said.