Synopsis: Moody's Investors Service has projected a bullish outlook for the BSE Sensex, forecasting it to reach 82,000 points within the next 12 months. This prediction represents a 14% upside from current levels, driven by a stable macroeconomic environment and robust earnings growth expected through 2025-26.
Moody's Investors Service forecasts a bullish trajectory for the BSE Sensex, predicting it will reach 82,000 points within 12 months, implying a 14% upside. This optimism is driven by a stable macroeconomic environment, policy predictability from the continued BJP-led NDA government, and robust earnings growth. The report highlights the importance of macro stability, structural reforms, and rising GDP growth in supporting India's outperformance in emerging markets. However, Moody's also notes potential risks from a global economic slowdown. India's significant role in driving global growth, fueled by increased offshoring, manufacturing expansion, and digital infrastructure advancements, underpins this positive outlook.
Macro Stability and Policy Predictability
Moody's emphasizes that the continuation of Prime Minister Narendra Modi's government will bring policy predictability, which is crucial for market confidence and stability. The report notes that the BJP-led New Democratic Alliance (NDA) retaining its majority is vital for maintaining a consistent policy framework, which in turn influences economic growth and equity returns positively. The focus on maintaining macro stability, particularly through measures to control inflation, is expected to support this growth trajectory.
Economic and Structural Reforms
With the NDA's re-election, Moody's anticipates further structural reforms that will enhance the earnings cycle and contribute to India's economic resilience. The government's commitment to macro stability and rising GDP growth relative to real interest rates are expected to bolster India's performance compared to other emerging markets. The rating agency has revised India's GDP growth forecast upwards to 6.8% for 2024-25, with headline CPI inflation expected to decelerate to approximately 4.5%.
Sectoral Performance and Global Risks
Moody's also highlights that Indian companies are likely to outperform, with earnings growth forecasts through 2025-26 being 500 basis points higher than consensus estimates. The agency acknowledges potential risks, including a global economic slowdown, which could impact this optimistic outlook.
India's Role in Global Growth
India is projected to drive a fifth of global growth in the coming decade, supported by increased offshoring of services and goods, a manufacturing boom, and advancements in digital infrastructure and energy transition. These factors collectively underpin Moody's positive assessment of India's economic prospects and the anticipated rise in the Sensex.
