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Sensex 37,000 Today, Sensex 40,000 Tomorrow? - Private Briefing

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Sensex 37,000 Today, Sensex 40,000 Tomorrow?
Jul 27, 2018

Do you remember our Sensex 40,000 call?

It was Rahul Shah who made the bold call. He made it before virtually everyone else...in March 2016.

Sure, it's not a bold call anymore. But it was...back then. This is what I wrote to you about our call a few months back...

  • The index had clawed its way to almost 30,000 in January 2015 riding on the Modi's election victory. Then after pausing for a couple of months, it started declining. It fell all the way to 23,500 in February 2016, the month before we made our call.

    In those days, people were wondering when we would see 30,000. No one was talking about 40,000. Market sentiment were so poor back then that no one really seemed to agree with us.

    Little did they know...the bull market had already resumed.

    Our logic was grounded on a timeless principle: reversion to the mean.

    We estimated that with better capacity utilisation, even if the earnings move back to the mean, the Sensex could touch 40,000 levels in three to four years.

    Given the profitability of Indian companies at that time was at an all-time low, the upside in earnings was a given.

    Sure enough, that is playing out right now.

    And it's happening despite the disruptions caused by GST and demonetisation...the former, we had not factored in... the latter, we could never have anticipated.

    Our prediction was coming true.

    On 25 July 2017, the Nifty hit 10,000 for the first time. The Sensex crossed 32,200.

    It looked like the market was determined to prove us right.

    But a lot of water has flowed under the bridge since then.
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