Sensex at 1 lakh: How far is this milestone for the Indian benchmark index?

The Indian stock market recently made headlines as the Sensex surpassed the remarkable 85,000 mark, a significant milestone that has sparked optimism among investors and analysts alike. With this achievement, the prospect of reaching the coveted 1 lakh (100,000) mark seems increasingly plausible.

Several factors, including strong economic projections, robust global market mood, supportive monetary policies, and growing domestic investments, are contributing to this bullish sentiment in the market. Driven by the positive economic outlook, domestic inflows have picked up significantly in recent years, with the rising retail participation in the equity markets creating substantial liquidity and stable demand.

"The recent surge in the Sensex beyond 85,000 is a significant achievement, making the target of 1 lakh (100,000) more achievable. Several factors could drive the market towards this objective: projected continued economic growth by the World Bank and IMF, the positive effects of US Federal Reserve rate cuts, substantial inflows of foreign institutional investments, and an overall optimistic sentiment in Indian markets," said Atul Parakh - CEO, Bigul.

Indian markets scaled a fresh all-time high for the seventh consecutive session on Friday, September 27, driven by positive global sentiment and robust domestic inflows. During today's intra-day trading, the Nifty climbed 61 points to hit a new peak of 26,277.35, while the Sensex surged 142 points to a record high of 85,978.25. However, after hitting new highs, Indian markets consolidated and turned red.

While the 1 lakh mark for the Sensex appears increasingly attainable, analysts have varied opinions on the timeline for reaching this milestone. Some experts predict that the Sensex could achieve this target early next year, while others anticipate it happening over the next 3 years.

Here’s a summary of predictions from different analysts.

Shweta Rajani, Head - Mutual Funds, Anand Rathi Wealth Limited expects Sensex to hit 1 lakh levels in the next three years.

Rajani emphasises the importance of GDP growth in the stock market's performance. With India’s GDP growing at a healthy rate of 6% to 7%, and expectations for real GDP to continue growing at 6% to 8%, the market returns could reflect this positive trajectory. Corporate profitability is also expected to grow in the range of 12-14%. All this would consequently reflect in market returns and an expectation of 11-12% CAGR growth over the next 2-4 years looks a reasonable expectation. Rajani suggests that the Sensex could realistically reach the 1 lakh level within the next three years.

Divam Sharma-Founder and Fund Manager at Green Portfolio PMS expects it to happen in the next 2 years.

Sensex can smoothly cross the 1 lakh mark in the next 2 years or so. The index is largely driven by banking, and IT, and understanding these sectors is the key to this estimate. The banking sector may face short-term pressure as margins could shrink due to interest rate cuts in the US, which might be mirrored by the Indian economy, leading to lower yields for banks. However, India’s strong structural economy, combined with high expected GDP growth in the coming years, should drive increased consumption, resulting in higher loan books and absolute growth for banks.

Ajit Mishra - SVP, Research, Religare Broking believes this target is achievable by the end of the next year or early 2026.

The Sensex hitting the 85,000 mark signals strong market performance, driven by factors like improvement in corporate earnings, favourable government reforms, and continued investment flows and it is already up by 17% this year so far. Reaching the 1 lakh milestone could be achievable by the end of the next year or early 2026, assuming an annual growth rate of 15%, barring major economic shocks. Apart from the existing favourable, key drivers such as earning growth, a resilient banking sector, and global liquidity will play a crucial role.

Aman Soni, Head of Operations at Prudent Equity envisions the index hitting the remarkable milestone of 100,000 by late 2025.

Over the past five years, the Sensex has achieved an impressive compound annual growth rate (CAGR) of around 17%. If this trend continues, bolstered by the strong earnings momentum we've seen in the last year, it’s not hard to envision the index hitting the remarkable milestone of 100,000 by late 2025. However, it's noteworthy that one of the largest components of the index—banking—has significantly underperformed. Year to date, the Sensex has returned approximately 18%, with a full quarter still ahead. In contrast, the banking sector has struggled to keep pace. The potential for a sustained rally hinges not only on the broader market dynamics but also on the recovery of the banking sector.

Mohit Khanna, Fund Manager at Purnartha sees Sensex hitting the 1 lakh mark sometime in calendar year 2025.

While it is for anybody to guess. But if we see the data, Sensex is currently trading at 25x TTM P/E – which is above its historical averages. The higher valuations are supported by a strong macro-outlook for India. Additionally, corporate earnings are expected to grow at 15-17% over the next twelve months. Therefore, we may see Sensex hitting the 1 lakh mark sometime in calendar year 2025.

Pravesh Gour, Senior Technical Analyst at Swastika Investmart says Sensex will reach the milestone by Diwali 2025.

The Indian stock market has been on a remarkable run, with the Sensex recently reaching the 85,000 mark. This surge, fueled by factors like the US Federal Reserve's rate cut and positive domestic economic indicators, has raised expectations of further growth. However, investors should approach this market with caution, as the high valuations present both opportunities and risks. While the 1 lakh mark seems within reach in the Diwali 2025, it's important to remember that markets are cyclical. A sustained upward trend often leads to periods of consolidation or even correction. It's crucial to avoid overextending positions and to have a realistic outlook on potential returns.

Vishnu Kant Upadhyay, AVP, Research and Advisory at Master Capital Services anticipates the Sensex to reach the 100,000 mark by the first half of next year.

The market appears to be in a "one step back, two steps forward" phase, consistently trading above key moving averages. Notably, the 21-day Exponential Moving Average (EMA) has provided strong support, offering frequent buying opportunities during market corrections. Given these strong technical and fundamental indicators, we anticipate the Sensex to reach the 100,000 mark by the first half of next year. Investors are advised to adopt a "SIP on DIP" strategy to capitalise on market dips while benefiting from the ongoing bullish trend.

Deepak Jasani, Head of Retail Research, HDFC Securities expects it to happen in the next few months.

Having risen 21% from the June lows, Sensex may require some months to rise another 17-18% to reach the 1 lakh mark/. In the meantime, it may consolidate/correct led by negative triggers that keep developing in the interim.

In conclusion, with the Sensex hitting the 85,000 mark, the journey to 1 lakh appears increasingly achievable, driven by strong economic fundamentals, investor optimism, and supportive policies. While the bullish sentiment prevails, investors must remain vigilant and strategic in their approach, taking into account potential market corrections and sector-specific performance. As we look ahead, the ability of the Indian market to sustain this growth will depend on its resilience in the face of evolving economic landscapes and investor sentiment.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.