Jefferies' Christopher Wood Aggressive On Sensex Reaching 1, 00,000 In Five Years, Here Is Why??
Asia’s oldest index Sensex has scaled new highs within the last two years. First it climbed to the Golden Jubilee mark of 50,000 after plunging ~30% in March 2020. Then the bourse ran the fastest 10,000 run to notch the 60,000 mark last year.
Now the benchmark index is predicted to succeed in one more milestone. Jefferies' Global Head of Equity, Christopher Wood envisions the Sensex hitting the 1,00,000 mark within the next five years. In his note, Greed & Fear, Wood says, the target is eminently achievable though the assumptions are made on aggressive factors.
Before we delve into the main points let see who Christopher Wood is and why his opinion matters today.
Who is Jefferies Christopher Wood?
Christopher is an equity expert you want to fathom. Jefferies' appointed Wood as Global Head of Equity Strategy in May 2019. Before entering the investment field, he was a financial journalist. He worked for the Hong Kong-based Far Eastern Economic Review between 1982 and 1984 and therefore the Economist for a decade between 1984 and 1994.
While his time at The Economist, Wood authored three books-
The End of Japan Inc: and the way the New Japan Will Look
Boom and Bust: the increase and Fall of The World’s Financial Markets
The Bubble Economy: Japan's Extraordinary Speculative Boom of the '80s and also the Dramatic Bust of the '90s
In addition to those books, Wood publishes a weekly called Greed & Fear. He has published over thousand problems with the weekly without fail since he started in 1996.
Now that you simply know a touch more about Christopher Wood, allow us to move to his latest forecast for Sensex within the Greed & Fear note.
Sensex to succeed in 1,00,000 mark?? Yes, the markets have had a tepid start this year. But Wood has faith within the Indian markets no matter the actual fact that they're down ~6% from the October peaks. Wood says growth-focused equity investors should specialize in India.
Wood writes in his note, "India has always been a securities market for growth investors with the multiple to travel with it. in a very G7 world where value investors may finally enjoy on extended period of out-performance over growth, until a minimum of the Fed performs another U-turn, India should be a primary object of focus for growth oriented equity investors."
The basis for the estimation is 15% earnings-per-share (EPS) which a five-year average multiple of 19.4 is maintained. Such growth will help the Sensex reach the 1,00,000 mark sometime in late 2026.
Moreover, he expects India to record perhaps the most effective earnings growth within the Asian continent this year.
Jefferies' Long-only India Portfolio
Tailwinds
Augmenting tax revenues and also the CAPEX push announced within the Budget supports the continuing resilience of the exchange despite perceived high valuations.
Resurgence of the housing cycle after a seven-year downturn may translate into a broader CAPEX cycle which will boost earnings. The securities market will withstand the rising interest rates.
The earnings growth forecast for the MSCI India index is 20.3% against 11.3% for Asia this year.
Headwinds
Rising inflation could be a pressing issue more for the western countries than India. Fed has announced it'll hike interest rates to tame inflation. However, this may have a reverse impact on India.
Wood says the increase within the Oil prices will certainly affect the Indian market. this is often the rationale he advises global emerging market investors to hedge their Indian equity exposure by owning energy stocks elsewhere. Currently Oil is trading at ~$90/barrel and there's every reason for it to go upward. As you see within the chart above, Jefferies’ have a 20% holding within the Energy sector companies.
To Conclude
The headwinds mentioned above are expected to disturb this momentum within the markets. But like Greed & Fear have a look at these disturbances as opportunities, you will want to shop for good stocks if the markets correct.
If you were to follow Wood’s words, "If this housing upturn proves to be the lead indicator of a broader private sector CAPEX cycle, as was the case during 2002-03, then India should yet again become one among the most effective performing stock markets in Asia because it was between 2003 and 2007."
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