In our previous report, we had said that the Nifty is moving from 15200 to 15500 level. According to our estimates, the Nifty has made a high of 15238 before closing at 15161. We also mentioned the Warren Buffet Valuation Method, which is the ratio of market capitalization and GDP. The total market capitalization of listed companies on the BSE has increased to $ 2.7 trillion this week. At the same time, GDP growth is also expected to come down to 2.8 percent from a contraction of 23 percent.
So this ratio is still less than 100 percent, which is very positive. As long as this ratio is below 120, the market will continue to boom, because 120 is the figure from which there can be signs of decline. In fact, this ratio can go up to 149 even if the bull is at a very high level. For example, before the market fell in 2007, this ratio reached 149 percent.
Earnings growth in the third quarter was over 20 percent. For the first time after many years, we have seen such figures. Many companies have announced 50 percent to 8000 percent growth in the bottom line, which is more than imaginable. For example, Bhansali Engineering announced an increase of 817 percent in the bottom line, Ineos announced 317 percent, while some chemical companies also announced a growth of 7800 percent.
This is mainly due to 3 factors. First China, second 25 percent tax system, and third Kovid-19 concessions and measures to increase demand. There was also a widespread impact on the commodity sector. The China Factor has done a lot of work in its favor. Almost all metals are at their all-time highs. This trend continues in February as well and hence it is widely expected that the March quarter will bring good figures from the December quarter. By the end of FY 2021, we will be able to grow more than the previous year, even though we have completely lost the 1st quarter. This would be a unique case in a scenario that would attract all global investors to visit India.
The chemicals, metals and IT sectors have done very well. But the surprise pack is the banking (both private and public) sector. Gross NPA is rapidly decreasing. Please remember that we bought Sbi at 149 which is now at 400, bought IndusInd Bank at 280, which is now at 1060, bought Axis at 300, which is now at 750, and ICICI at 275 Was, which is now at 650 and we believe the boom is not over yet. The reforms, low NPAs, and high recovery have done wonders. Consolidation in the banking industry is natural with the announcement of the sale of two public sector banks. The objective is very simple, to make the size of the bank large and consistent.
The banking sector in India will grow a lot with the additional expenditure of Rs 40 lakh crore (20 in 2021 and 20 in 2022). This will set new standards in the banking sector. Therefore the banking sector should be given importance in the portfolio. We had earlier set a target of 30,000 at the 18,000 level in Bank Nifty, which has increased to 35,000. Now we are increasing our target to 44,000 and 50,000 and all this will happen in 2021. It also means that the banks mentioned above will increase by 50 to 80 percent.
We also increase the target of Nifty from 16600 to 16700 in 2021. As mentioned earlier, there is still an investment of 40–45 billion dollars in India. Also, we believe that the major FDI will come in the manufacturing sector, as the tax rate in India is the lowest, which is 15 percent. You should also appreciate that the new FDI regime will prove to be a game-changer for many sectors, especially real estate. If Microsoft wants to bring its manufacturing base to India (democracy, low cost, easy labor, easy availability of raw materials, and lowest taxes), at least 5 million square feet of commercial space will be required.
After that, their foreign technocrats and local talent will need the same residential space. The resulting cycles of commodity demand will work. So far Vietnam is the leading country as a new location for companies originating from China. However, we are sure that India is doing all that will attract more investment in India. India plans to spend $ 100 billion in infra spending in the next 5 years only to bring these multinationals. Budget 2021 was the first step towards this.
The $ 100 billion infra spending is huge, but where will the resources come from? Disinvestment is its remedy. The government plans to raise Rs 25 lakh crore from the sale of PSU companies in the next 5 years. The oil and gas sector alone will give more than 10 lakh crores, which is more than 100 billion dollars. BPCL alone will give Rs 1 lakh crore and hence it is not difficult to get Rs 8 lakh crore. Then it comes to selling coal mines. The 5G auction will fetch more money. 15% tax will open the flow of inflows from abroad.