Moody’s, a global rating agency, has expressed optimism about the Sensex, following the re-election of Prime Minister Narendra Modi’s government in 2024. They have set a 12-month forward target of 82,000 for the BSE Sensex, implying a 14% upside potential from the current levels.
This optimism is attributed to the policy predictability that the Modi government brings. That is expected to positively influence growth and equity returns in the coming years. Moody’s believes that the government will continue to focus on macro stability, particularly inflation control, to inform its policies.
The Indian stock markets have already witnessed a strong rally since the new government’s formation. For both the Sensex and Nifty hitting new all-time highs in recent weeks. This trend is expected to continue, driven by factors like cooling inflation, strong economic growth, and increased foreign investment inflows.
Why Moody’s Predicted 82000 target for Sensex?
Moody’s prediction of an 82,000 target for the BSE Sensex within 12 months is based on several factors:
Strong Economic Fundamentals: India’s economy is expected to continue growing at a robust pace. That driven by factors like increasing domestic consumption, infrastructure investments, and a growing services sector. Moody’s has revised India’s GDP growth forecast upwards to 6.8% for 2024-25.
Policy Stability: The re-election of the Modi government provides policy continuity and predictability, which is seen as positive for investor sentiment and economic growth.
Inflation Control: The government’s focus on controlling inflation is expected to create a favorable environment for businesses and investors. Moody’s projects headline CPI inflation to decelerate to around 4.5% in 2024-25.
Corporate Earnings Growth: Strong economic growth and policy stability are expected to translate into robust earnings growth for Indian companies. Moody’s estimates that earnings could compound at 20% annually over the next 4-5 years.
Global Growth: India is expected to play a significant role in driving global growth in the coming decade. With projections suggesting it could contribute to a fifth of global growth. This positive outlook is expected to attract more foreign investment into Indian equities.
Positive Market Sentiment: The combination of strong economic fundamentals, policy stability, and robust corporate earnings growth has created a positive sentiment in the Indian stock market, leading to a strong rally in recent weeks.
However, Moody’s also cautions that a substantial global growth slowdown could pose a risk to India’s growth trajectory and potentially impact the Sensex’s performance.
Finally, Moody’s prediction of an 82,000 target for the Sensex reflects a positive outlook for the Indian economy and stock market, driven by strong fundamentals, policy stability, and robust corporate earnings growth.