Navigating the Upcoming Market Trends: Sensex's Potential for 70000 by December 2022
As we approach the end of 2021, the Indian stock market, represented by the iconic BSE Sensex, has experienced a significant downward movement. The key question that arises is whether the market will hold steady or plunge further to 50000 levels by December 2021. While some predict a potential correction, others see this as a buying opportunity, poised for recovery in the coming months.
Current Market Conditions and Predictions
The Indian market has witnessed a period of intense corrections, with the Sensex dropping over 2700 points and the NIFTY declining more than 800 points in the past five trading sessions. The primary driver of this downturn is the continuous selling by foreign institutional investors (FII). Additionally, the underwhelming performance of the Paytm Initial Public Offering (IPO) has further dampened investor sentiments. This raises the crucial question: is this a beginning or the end of the fall?
Though the current downward trajectory is concerning, there are factors that suggest a potential rebound. Analysts from Morgan Stanley, for instance, seem confident that while the market may face short-term challenges, it is on track for a recovery in the near future. Ridam Desai, the equity strategist at Morgan Stanley, predicts an increase in fixed income inflows, new issuances, and a decline in global correlations. This optimistic outlook points towards potential earnings growth exceeding 27% annually over the next few years.
Earnings Growth and Market Expectations
While forecasted earnings for the fiscal year 2022 have been adjusted downwards by 7%, the FY23 figures remain unchanged. This minor adjustment does not alter the long-term growth trajectory. Morgan Stanley is particularly optimistic, projecting the Sensex to rise to 70000 by December 2022, with the majority of this growth occurring in the second half of the year. This prediction is based on the expectation that investor interest will shift from earnings to market returns as the market absorbs trailing growth.
In the bull case scenario, the Sensex could climb even higher, potentially reaching 80000 by December 2022. However, this prediction hinges on a few key factors, including India's inclusion in global indexes and sustained economic growth.
Investment Strategy: Long-Term vs. Short-Term
Deciding whether to buy or sell during this volatile period depends on your investment horizon. For those seeking near-term profits, the current market conditions present substantial risks, and it might be prudent to sell and mitigate losses. Alternatively, for long-term investors, this correction provides a valuable opportunity to acquire shares at more attractive prices.
Moreover, the correction has led to a discount in the prices of blue-chip stocks. For investors who believe in the market's resilience, this is an excellent time to accumulate shares at the current lower levels. The bull case projections should encourage those with a long-term perspective to hold onto their investments, patiently waiting for recovery and potential gains.
Conclusion
In summary, while the recent corrections in the Indian stock market, particularly the Sensex, may seem concerning, the underlying factors suggest a period of recovery. The inclusion of India in global markets, along with the expected earnings growth, points towards a promising future for the Sensex. For investors, this is a time to reassess their strategies, focusing on long-term gains rather than short-term fluctuations. Whether you agree or disagree with these projections, one thing is clear: the market's journey ahead is full of opportunities and challenges.