“Crudely, every 10 years, Sensex grows three fold. In the last 20 years, it has climbed 10-fold. Going by that analogy, the index should hit 1,25,000 to 1,50,000 by 2030. Simply speaking, if Sensex grows at 15-16 per cent CAGR, then by the formula of 72, it can hit 1,00,000 in the next 4-5 years. However, this calculation assumes economic growth and conditions remain slightly better than what they are today,” said Kedia in an exclusive interview with ETMarkets.com.
Launched in 1986 (with 1978-79 as the base year), BSE Sensex closed above the 5,000 mark on October 11, 1999 during the dot com boom when technology companies were flourishing, not much unlike today. But before that, and since then, it has been through many tides and tribulations.
Kedia also highlighted that in the last two decades,the picture of the market has changed significantly. The market community has grown in tandem with Sensex’s growth.
“This is a journey, not a destination. I remember, 20 years back when Sensex hit the 5k mark, 5,000 balloons were flown from the BSE building. Now, flying 50,000 balloons is a bit difficult,” he said jokingly. “But we have come a long way since then. Many new market participants have joined in. A lot has changed. But hitting this milestone does not mean one should change her investment strategy.”
In the 35-year journey, investors on Dalal Street have made a massive amount of wealth. The total market capitalisation of 4,700 BSE-listed firms is close to Rs 200 lakh crore. That means they have created over Rs 65 crore every hour over 35 years!
Kedia believes investors should look beyond Sensex or Nifty to build wealth, and focus on individual stocks as growth in indices is limited by the growth of its constituents.
“Investors should not focus on index rather on individual scrips. Many shares are there that have risen 100, 200 or 300 times in the last 20 years. The index should be used just as a reference. One should focus on what is the upcoming industry that will create wealth for you,” he said.
However, given the market is at a record high, he is not buying or selling anything at the moment, and instead, he is just riding with the tide with the stocks he holds.
“I bought some technology stocks a few months back and I am sitting with them. When the market gets a little hyper, I slow down. I try to keep my mind cool when the market is rallying. I am not doing anything new,
bas tamasha dekh raha hu (watching as things unfold). Besides technology, I am also invested in consumer and speciality chemicals but I am slowly moving towards a technology centric portfolio,” he said over a phone call.
In his opinion one industry that can be a possible wealth creator is the product focussed technology sector. “I think the future of technology shares, especially those that are product based, are bright. In India there are very few such companies. We have an abundance of technology services firms but not product ones,” Kedia said.
“In technology, there are many companies, for example NIIT that can give good returns. It is a good company with cash. Management has announced a buyback at a good premium as well. So even if the market falls, this stock will fall comparatively lesser. Thus at this time people should focus on safe shares.”
Technology shares have been on a roll during the pandemic, as the reliance on technology has increased with the world confined at home. BSE Teck, which constitutes 27 technology-focussed stocks, has risen 122 per cent since March lows.
He also holds a bullish view on the infra sector but rues the fact that the segment lacks the number of investable companies. “We lack infra focussed companies. There are very few good ones for example L&T.
Par ab akela chana toh bhad nahi phod sakta naa! (A lone gram can’t bust the oven). L&T alone cannot create India. But again, those smaller companies that are in infra space can do good,” he said in a freewheeling discussion.
Besides, he also sees prospects for real estate, and the sectors that depend on it, to do well over the next few years, as the sector is moving out of a downward cycle to an upward one.
“People are saying that real estate will do well. Its downward cycle has ended and it may rally for the next few years. So, stocks from this sector or housing finance sector could do well as they will be safer options,” he said.
However, Kedia sees lack of jobs as a risk to India’s growth going ahead. “This could be demographic risk going ahead. Given how the population is growing and if we cannot generate enough jobs then how long term dreams may be crushed.”
Disclaimer: Vijay Kedia is not a Sebi registered advisor, hence, stocks mentioned by him are not recommendations. Please do your own due diligence before investing or consult a certified financial advisor.