Can the Sensex ever touch 1,00,000? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Can the Sensex ever touch 1,00,000?

Jul 15, 2014

It's amazing how words like 'stock market' and 'BSE-Sensex' suddenly start finding much more frequent mention in everyday conversations when the indices are rising and touching new highs. Conversely, when markets are falling or remain stagnant for a while, general interest levels in the stock market quickly nosedive.

Indeed, with the Sensex touching new highs recently, interest levels in the stock market are currently running high.

One of our team members recently had an interesting experience. A friend came up to him with an incredulous look on his face and exclaimed "They're saying the Sensex will touch 1,00,000 points one day! Can this really happen?"

What would be your answer to such a question?

The simple answer is, yes it will. How?

Back to the basics

Well, understanding the answer to this questions demands that you understand a very basic thing about how companies function. And make no mistake, as basic as this is, most small investors in the market do not fully comprehend the implications of this basic nature of businesses.

Companies make and sell their goods and services, and in the process they earn a profit. The average company with a sustainable business model will be able to increase its sales and profits over the years. And the secret to how they are able to do so lies in what they do with their previous year's profits. They use that money to buy more assets to run the business, and in turn use those assets to make and sell more goods and services. As this process continues over the long term, the size of these businesses keeps marching upwards.

A great shortcut

One great proxy to track these changes in a company is to view the year to year changes in its net worth. When companies retain a part of their previous year's profits, this gets added to their net worth. In the average case, this change in net worth is a good indicator of the increase in the scale of business that company can conduct. So an increasing net worth leads to a business getting bigger and bigger over the years. Since a bigger business means a higher value for the business, the stock prices of the average company also follows this upward trajectory over the years.

Getting back to our question.

The Sensex is nothing but a weighted indicator of the prices of 30 big Indian companies. Considering that these companies are going to, in aggregate, keep increasing in size and thus price over the years (due to the reason given above), the Sensex will keep treading higher over the long term.

In other words, it is just a matter of time before you see the Sensex touching 1,00,000. How much time?

Well, if one were to assume that the 30 Sensex companies will be able to grow in size at an average rate of 15% per annum and valuations will be more or less the same as currently, it will take roughly 10 years for the Sensex to quadruple from its current level of 25,000 - and thus touch that glamorous figure of 1,00,000.

Sounds hard to believe isn't it? But then when Sensex was around 5,000 ten years back, even the current level of 25,000 looked impossible to achieve.

Equitymaster requests your view! Post a comment on "Can the Sensex ever touch 1,00,000?". Click here!

2 Responses to "Can the Sensex ever touch 1,00,000?"

lambodar borah

Jul 25, 2014

Not impossible but will take 6 to 7 years time.


Akhil Khanna

Jul 16, 2014

The markets can be at any level because derivative positions determine price movements and the media and so called financial experts scramble to assign reasons linking the moves with events in the real economy.

The markets continue to rise till all short positions in the market are covered and the majority of traders move to the long side. Once this is done the market falls till all long positions are closed and short positions undertaken. Then rinse and repeat. The price mechanism has little to do with the actual demand, supply, fundamentals or state of the economy.

Equitymaster requests your view! Post a comment on "Can the Sensex ever touch 1,00,000?". Click here!

More Views on News

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

How to Save Money by Exiting Stocks Before They Fall podcast (Views On News)

Sep 24, 2020

A penny saved is a penny earned. It doesn't matter where you enter. All that matter is where you exit. Watch this video to identify an opportune time to exit your investments and book profits.

ICICI Prudential ESG Fund: Aims for Sustainability (Outside View)

Sep 24, 2020

PersonalFN briefly explains the newly launched fund : ICICI Prudential ESG Fund.

What to Do if there is a Second Wave of the Stock Market Crash (Profit Hunter)

Sep 24, 2020

Here's what I think investors should do in this selloff.

IDFC Mutual Fund Starts Campaign 'SIFI'. Should Buy Into the Idea? (Outside View)

Sep 23, 2020

IDFC Mutual Fund is taking the road less travelled and hence started a campaign SIFI (SIP in Fixed Income) to promote the concept of SIP for its debt funds investors.

More Views on News

Most Popular

Safe Stocks

Here are some insights on why buying safe blue chip stocks is not the easiest task in investing.

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 24, 2020 (Close)