Sensex up 850 times in 45 years! Will it hit the 1,00,000 milestone in FY25?

By compounding wealth at a healthy CAGR of around 16%, India's heartbeat index Sensex has given eye-popping returns of 850 times to investors in the last 45 years. An investment of Rs 1 lakh, though not a small amount by any means in that period, made at the time of Sensex' inception in April 1979, would be worth Rs 8.5 crore now.

Having scaled another milestone of 85,000 this week, Sensex is now inching closer to the 1 lakh mark - a feat that some of the most optimistic bulls on Dalal Street expect to achieve in FY25 itself. If Sensex keeps on growing at its historical average CAGR of 16%, then the figure is likely to be hit only by around December 2025.

Sensex now needs a jump of another 17.5% to hit the magical 1,00,000-level.


"The current market levels are a reflection of market fundamentals and liquidity flows. Fundamentally, the market should deliver 12-15% returns per annum and therefore we expect 18-24 months for markets to get to these levels. However, there is a strong buying momentum in the market that is fueled by strong liquidity. In such a scenario, markets can overextend. Which means that we may see the 1 lakh number shortly," says Vaibhav Porwal, co-founder, Dezerv.

Also read | S Naren shares his value investing mantra after turning Rs 10 lakh to Rs 5 crore in 20 years

Retail flows, however, may not be enough for Sensex to hit 1 lakh. The next leg of rally in bluechips is likely to be led by banks and foreign investors.

FII flows into India could accelerate if the Fed easing cycle triggers a risk-on rally in the US. "Foreign investors have largely missed the bus so far, but we believe that they are now willing to look through elevated valuations and increase their India exposure," said Seshadri Sen of Emkay Global.

FIIs have invested about Rs 92,000 crore so far in the calendar year, compared with the Rs 1.7 lakh crore (1.2% of Nifty market cap) in CY23, indicating that there is room for acceleration going forward.

At the same time, there is also a risk from a decline in FII inflow and shift of funds to other emerging markets due to their cheap valuation.

"I cannot make out a case for even a 5% or 10% type of correction because whenever there is bad news, there is so much money waiting on the sidelines to buy that it quickly absorbs any correction. Despite the flow of IPOs and QIPs and management selling, the money flow is just too strong," said Dipan Mehta, Director, Elixir Equities.

Last month, mutual funds were found sitting on a cash pile as big as Rs 1.86 lakh crore.

"Portfolio managers also have got a lot of cash to invest and then there are retail investors, small ones from all over the country, wanting to invest in equities. So it is like a waterfall of investors and a huge gush of liquidity coming in," Mehta said.

Also read | Zerodha traders sitting on Rs 1 lakh crore profit, we made Rs 4,700 crore in FY24: Nithin Kamath

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)