The late Rakesh Jhunjhunwala, often revered as the Big Bull of the Indian stock market, wasn't just an investor; he was a force of nature. Besides his legendary stock picks, the investor was famous for his unapologetic optimism about India's growth story. Among his many famous calls, one prediction still turns heads for its sheer audacity: the forecast that the Nifty 50 would hit a staggering 1,25,000 by the year 2030.
But as the calendar flips closer to that deadline, it's worth sitting down and taking a hard look at the numbers. Did the Big Bull get his prediction wrong?
The 15-Year Bet
The story starts back in December 2014. At the time, the Nifty was trading at 15,000, with an earnings per share (EPS) of around 400, and a price-to-earnings (PE) multiple of around 20.
Jhunjhunwala's massive 1,25,000 target wasn't just pulled out of thin air. It was built on one incredibly bold bet: he believed that Nifty earnings would grow at an 18% compound annual growth rate (CAGR) for 15 straight years. Based on this, he figured that an 18% CAGR would cause the EPS to multiply by 15 times over that period. He assumed that even if the market traded at that same PE multiple of 20, it meant the Nifty would come close to the 1,25,000 mark.
The Problem With The Math
There was one problem: the math didn't quite add up.
The thing about back-of-the-napkin calculations -- they don't always hold up under a microscope. Even in a flawless, dream scenario where Nifty EPS managed a relentless 18% CAGR for a decade and a half, it wouldn't result in a 15x growth. The reality of compounding is that an 18% CAGR over 15 years yields about 12 times growth.
If we apply the correct multiplier, an EPS of 400 growing 12 times would reach roughly 4,800 by 2030. Multiply that projected EPS by a PE of 20, and that takes the Nifty to around 96,000, still a phenomenal return by any measure, but short of the 1,25,000 target.
The "Lost" Earnings Years
Besides the initial mathematical issue, reality had a brutal wake-up call waiting. For investors, the stretch between 2014 and the pre-COVID days of 2020 was an agonising wait. Earnings didn't just slow down; they practically flatlined as banks and India Inc focused on develeraging their balance sheets from the excesses of the post-2008 years.
During this agonisingly slow stretch, the Nifty EPS crawled from 400 to just about 450. By February 2021, following the chaos of the pandemic, the EPS had fallen right back down to 400. Astonishingly, seven long years after Jhunjhunwala made his prediction, the baseline earnings were sitting at the exact same level.
A Reality Check and a Pivot
To his credit, the Big Bull was open to correcting himself in the face of new facts. In 2021, with the Nifty trading around 15,000, Jhunjhunwala openly admitted that his initial timeline was "too optimistic."
But he didn't abandon his bullish spirit. He came back with a slightly revised target: Nifty 1,00,000 by 2030. This time around, he did not project any PE or EPS number to back the forecast.
The 2030 Mountain: An Impossible Climb?
Since that reset in February 2021, things have changed dramatically.
Earnings have seen a massive resurgence. The Nifty EPS has surged at an impressive 24.5% CAGR, multiplying by 3.20 times, to about 1,200. Still, today the Nifty sits around 23,000, with a PE ratio of 19.
So, what would it take for the Nifty to hit 1,00,000 by 2030 from where we are today?
Assuming the market keeps its current PE multiple of 19, the EPS would have to grow 4.4 times to Rs 5,200 in just four short years. To pull off a 4.4x jump in that tight window, Nifty earnings would need to compound at a mind-bending 45% CAGR.
Should the Nifty get re-rated to say 25 times, the EPS will have to grow to Rs 4,000. But even that would call for an annualised growth of 35% here.
If it grows at the 25% clip like it has over the past few years (yielding an EPS of Rs 3,000), the market will have get re-rated to an astonishingly high multiple of 33 times – possible but what might be considered bubble territory.
Jhunjhunwala was undoubtedly right about the structural, long-term bull market in India. He saw the big picture when few others did. But it's possible his 2030 projection might just have to remain too insurmountable a target.
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