Nifty 50 Eyes 50,000 by 2035: Retail Surge Fuels Growth
By Market Desk
Motilal Oswal predicts Nifty 50 could hit 50,000 by 2035, driven by 12% earnings growth and a surge in retail investment, despite FII outflows. Explore the projections.
Raamdev Agarwal, Chairman of Motilal Oswal Financial Services, projects the Nifty 50 index is highly likely to reach 50,000 before 2035. This forecast implies the index could nearly double within the next six to nine years, driven by an assumed 12% annual earnings growth for Nifty companies.
Agarwal’s estimation aligns with an 11% nominal GDP growth rate and outlines various timelines based on market price-to-earnings (P/E) multiples. The market veteran highlights significant structural shifts underpinning this optimistic outlook.
Key Projections & Drivers
- Nifty 50 Target: 50,000
- Projected Timeline: Before 2035 (6 to 9 years)
- Assumed Nifty Earnings Growth: Approximately 12% annually
- Nominal GDP Growth Correlation: 11%
The timeline for hitting the 50,000 mark varies with P/E multiples. Maintaining a constant P/E multiple of 20-21x suggests an 8-year path, while an increase to 24x could shorten it to 6 years. Conversely, a decrease to 18x might extend the journey to 9 years.
Retail Boom Fuels Market
A critical driver of the current market strength is the unprecedented surge in retail investor participation across India. This influx has dramatically altered market dynamics.
- Demat Accounts Growth: From 4 crore to 23.4 crore
- Mutual Fund Folios Increase: About 19% in the last year
- Monthly SIP Investments: Surpassed Rs 31,000 crore
- Equity Mutual Fund AUM Growth: Nearly 30% annually over the last decade
Agarwal describes this rapid increase in new demat accounts as potentially unparalleled globally. He draws parallels to structural changes observed in the US market four decades ago, dubbing India’s moment its ‘401(k) moment’.
Domestic Strength vs. FII Outflows
Despite substantial selling by Foreign Institutional Investors (FIIs), domestic investment has more than offset these withdrawals. FIIs sold approximately $18 billion last year and $25 billion in the first half of this year.
- Domestic Investment Surge: From $5-10 billion annually (around 2020) to nearly $90 billion annually recently
Agarwal believes FIIs have oversold Indian equities, citing India’s relatively low weightage in global allocation benchmarks. He asserts that domestic demand alone is sufficient to sustain a strong market, leading to structurally high valuations.
Corporate Profits and AI Impact
India has seen an improvement in the share of corporate profits relative to its GDP, rising to around 5.7% from a low of 1.7% in 2019-20. This figure, while still below its peak, indicates a healthier corporate landscape.
Agarwal suggests that artificial intelligence (AI) could further enhance this ratio by accelerating the return on capital more rapidly than the return on labor. He advises investors against an exclusive focus on the Nifty number itself.