India Inc’s latest earnings have not instilled much confidence among equity investors, consequently, drop in earnings continue.
An analysis by BofA Securities Ltd shows that as of July 2022, the Street has revised up Nifty FY23/24 earnings by -2.4%/-1.8% month-on-month and -2.5%/-2.2% year-on-year. has done. , Concerns about sluggish global growth due to the imminent threat of recession do not paint a very encouraging picture of the earnings outlook.
According to a foreign research house, the earnings revision ratio for both Nifty and NSE 500, which stands at 33% and 37% respectively, may further fall as the ripple effects of a slowing global cut in key frontline sectors . growth.
The income modification ratio is also known as the ratio of income upgradation to downgrade. A higher reading indicates a positive surprise to the upside and vice versa.
“Industrial (+3.7%), Discretionary (+3.6%, led by Auto) and Energy (+2.6%) saw FY23 MoM earnings upgrades, while Materials (-13.4%) and IT (-4.1%) saw MoM earnings growth. All other sectors saw a flat correction. For FY24, discretionary (+4%) and industry (+2%) saw an uptick, while materials (-11%) saw a decline on MoM basis, “The BofA report dated 8 August said.
In a positive softening of commodity prices Analysts say there is some relief, though its impact on margins may take some time to become visible. In addition, price rise and demand momentum, especially for export-oriented companies, are other important parameters that will decide the fate of corporate earnings.
Meanwhile, the Indian market is trading at a premium to its emerging market peers. Data from Bloomberg shows MSCI India is trading at nearly 17 times the one-year price-to-earnings multiple, which is higher than the PE of MSCI Asia Ex-Japan and MSCI Emerging Markets Index. To justify these valuations, it is imperative that corporate earnings pick up further.
The special thing is that after a long series of sell-offs, foreign institutional investors have started making a comeback in the Indian stock market. And one of the factors that will decide the sustenance of foreign fund inflows is a meaningful earnings revival.
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