Striking a bullish note on prospects for the economy, Yes Securities, a wealth broking and investment advisory, on Tuesday said that it expects the benchmark indices to grow at compounded annual growth rate (CAGR) of 20 per cent over the next four years. At this rate, Sensex will likely touch 1,25,000 and Nifty at about 40,000 in four years, Yes Securities said.

Bullish on economic growth

The reason behind this optimism is that India is seeing a novel confluence of forces that stands to transform the economy over the next decade or so, the brokerage house said. This forecast of Yes Securities came on a day when Indian equity benchmarks hit a six-month high, led by gains in financial, oil & gas and IT shares, with the Nifty50 closing above the 18,000-mark for the first time since April 4.

“Our house view is that over the next four years we could see markets recording a CAGR of 20 per cent from here on. That would loosely translate to 1,25,000 for Sensex. For Nifty, this could loosely translate to 40,000 in four years,” Nitasha Shankar, Head - PRS Equity, Yes Securities, told BusinessLine.

Yes Securities sees average Nifty50 earnings growth over the next three years (23.4 per cent) to exceed the last decade (FY11-20) average Nifty50 EPS growth of 6 per cent. 

Premium valuation to sustain

Shankar said banks (especially small finance banks), auto and auto components and consumer durables are expected to outperform this fiscal.

On whether Indian equities will sustain the current premium valuation it commands vis-a-vis other emerging markets, she said this would certainly be the case if “we are able to grow our GDP at faster rate than now”.

India certainly “deserves” premium valuation as all of the growth expected in GDP is going to be internally developed and that India is not too dependent on any other country to drive its growth, Shankar added. 

Yes Securities also sees the IT and Pharma sectors’ ongoing underperformance in the equity markets continue for a while. “I don’t see IT and pharma participating in the next six months,” she added.

Co’s growth targets

Meanwhile, Anshul Arzare, Executive Director and Chief Business Officer, Yes Securities, said that the brokerage house has currently close to two lakh customers. “The aim is to grow our customer base to about three lakh by March 2023 and about five lakh by March 2024,” he added.

Anshul Arzare, Executive Director and Chief Business Officer, Yes Securities

Anshul Arzare, Executive Director and Chief Business Officer, Yes Securities

Despite discount broking houses taking wings in the Indian market in recent years, Yes Securities has no plan to change its existing business model and would continue to be a full-service brokerage house, Arzare added.