Nifty at 50,000 Before 2035? Raamdeo Agarwal Shares Bullish Outlook for Indian Markets

Can India’s benchmark Nifty 50 index reach the 50,000 mark before 2035? Motilal Oswal Financial Services chairman Raamdeo Agarwal believes the possibility is highly likely if corporate earnings continue to grow at a healthy pace and domestic investment remains strong.

magnific

Agarwal told the 22nd Motilal Oswal Annual Global Investor Conference in Mumbai that Nifty 50 could potentially reach 50,000 within the next six to nine years. In fact, he predicted that the index’s earnings should grow at a rate of around 12% a year.

Agarwal said that Nifty’s ability to achieve the ambitious target will largely depend on the valuation multiple investors are willing to assign to the market. He gave three possible scenarios based on changes in the price-to-earnings (P/E) ratio.

Three possible paths to Nifty 50,000

If the Nifty’s P/E multiple remains broadly unchanged at around 20-21 times earnings, the index could take around eight years to reach 50,000, according to Agarwal’s calculations.

In a more optimistic valuation scenario, the P/E multiple would be around 24 times, and the goal might be achieved in about six years.

However, if the valuation multiple falls to around 18 times, the index could take around nine years to reach 50,000. Agarwal said that even this lower valuation assumption would still leave the target within reach before 2035, if earnings continue to expand.

So the projection does not depend solely on valuation expansion. It still requires earnings growth to be a factor in the calculation.

Earnings growth remains crucial

Agarwal already seems to see signs of improvement in corporate earnings. Nifty earnings should grow by around 12% annually, he said. In the current quarter, though earnings could be even better, perhaps 16% or 20%.

The earnings assumption is generally based on nominal GDP growth of around 11%. If Indian firms continue to grow profits with the expansion of the economy, then the earnings base for the Nifty will not only grow significantly in the coming years.

Agarwal also highlighted the dramatic rise in retail participation as one of the most important structural changes in India's financial markets.

Retail participation changes the market

India’s growing number of retail investors has changed the dynamics of the stock market. According to Agarwal, the number of demat accounts has increased from around four crore to about 23.4 crore. Around 29 lakh new accounts were reportedly added in a single month.

He suggested that such a rapid expansion in market participation is unusual on a global scale.

The same is happening with the mutual fund industry. The number of mutual fund folios has increased by around 19% in the past year, from about 5.5 crore to 7.4 crore.

Monthly systematic investment plan (SIP) contributions are at about ₹31,000 crore and equity mutual fund assets under management have increased significantly over the past decade. Agarwal said equity mutual fund AUM has gone from around ₹4 lakh crore to around ₹86 lakh crore during this period.

He compared India's current retail investment trend with the structural transformation seen in the United States during the early years of the 401(k) retirement savings system.

Domestic investors offset FII selling

Another major factor highlighted by Agarwal is the increasing strength of domestic investment despite huge selling by foreign institutional investors (FIIs).

He said FIIs sold around $18 billion worth of Indian equities last year and another $25 billion during the first half of the current year.

But domestic investment has increased drastically and has helped offset foreign outflows. Agarwal said domestic flows, which were around $5 billion to $10 billion annually around 2020, have now grown to nearly $90 billion a year. In the first half of the year alone, it is estimated that about $54 billion of it came in.

Agarwal believes foreign investors may have already substantially reduced their exposure to India. India's weight in global allocation benchmarks like MSCI remains around 7-8%, he said, which he believes is fairly low compared with the size of India’s economy.

Corporate profits and AI could provide another boost

Agarwal also discussed the improvement in corporate profitability. The share of corporate profits in India’s GDP has reportedly increased to around 5.7%, compared with about 1.7% in 2019-20.

Even if the figures remain below the peak of around 6.2% in 2000, Agarwal believes there is still room for improvement.

Artificial intelligence could accelerate this trend by increasing productivity and returns on capital. AI has the potential to grow returns on capital much faster than returns on labour, which could have implications for corporate profitability, Agarwal says.

Despite his bullish forecast, Agarwal cautions investors not to focus on what the Nifty’s headline number tells us. The broader factors in the market— earnings, valuations, domestic flows, corporate profitability and structural economic changes– are more important than a single index target.

The Nifty 50 becoming 50,000 is a forecast, not a certainty. Market valuations, earnings growth, interest rates, global economic conditions, crude oil prices, foreign investment flows and geopolitical developments might all affect the future trajectory of the index.

So Agarwal’s forecast highlights the long-term potential of India’s equity market, yet also underscores the importance of earnings growth and sustainable economic expansion in support of higher market levels.