"We believe markets could be range bound in the near term, but over the long run, it may follow the earnings growth trajectory." Anand Shah, Head - PMS & AIF Investments, ICICI Prudential AMC Ltd.
Is this the beginning of a new bull run? And a more pertinent question, is this time to sell? Being student of market took us back to October 2021, when Mr. Market hit a new high. While the market values are at a new high, valuations are far lower than what they were in October 2021 as absolute earnings growth rate is strong across Large caps, Midcap and small caps, see Exhibit 1.
Since October 2021, earnings have recovered, and the market has rewarded top 500 companies by market capitalization, which showed significant improvement in their Return on Equity (ROES). These companies that achieved earnings growth, maintained reasonable valuations, and lastly where earnings upgrade materialized, have been duly rewarded by the market.
More importantly, it is pertinent to note, that while the market prices are at a new high, valuations are not. This can be clearly seen in Exhibit 1. Earnings is one of the important factor that has been the key driver for stock price. Valuations on the other hand have eased due to the staggering rise in earnings from the previous peak.
The key question here, is that from here on, is the earnings growth sustainable to demand a further upside? Given the trajectory of earnings over the past couple of years, earnings momentum may ease on a consolidated basis. Thus, as we stand, markets are neither cheap or very expensive. Going ahead, we believe markets could be range bound in the near term, but over the long run, it may follow the earnings growth trajectory.
One should also take cognizance of the fact that earnings have not grown uniformly across sectors or even market caps from October 2021 to June 2023.
This story is from the September 2023 edition of Investors India.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the September 2023 edition of Investors India.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Sign In
Are You Drinking Too Much Coffee? If Yes, Then You Are Taking A Big Risk!
Coffee contains caffeine in maximum percentage:
LIC MUTUAL FUND
According to World Bank data, women represent 49.7% of the world population. In India, women represent 48.4% of the population but they contribute only around 18% of the GDP compared to 41% in China.
Maintain 15-20% exposure to US funds in your equity portfolio
2022 was a difficult year for stocks in the United States (US), particularly for the large tech companies known as FANG. Concerns about the Russia-Ukraine conflict, inflation, etc led to a significant drop in their values.
Systematic Investment Plan (Sip): Meaning, Benefits, How It Works
We all dream of buying a car, dream house, gadgets, etc. This all can come to reality if we have strong financial planning. One of the best options is to start investing in mutual funds through a SIP (Systematic Investment Plan).
How to repair your credit score
Fintechs have seen their personal loan portfolios rise at a humongous pace between 2017-18 and 2022-23. However, loans below Rs. 50,000 are showing signs of strain, according to a white paper brought out by Experian and the Digital Lenders' Association of India. If you have defaulted on a loan recently, here are steps you can take to repair your credit score.
Abhaya Here For Her Smile -
Ever wondered why brushing and flossing is so important? Well, it's not just about sparkling white teeth!
The Pathway to Building Wealth: Unlocking Prosperity through Strategic Knowledge and Investment Habits
Mr. Sanjiv Bajaj is the Jt. Chairman & MD, Bajaj Capital, building the platform for the Business leaders of the Financial Services and Advisory sector to exchange their vision, experience, and views on making the right financial decisions.
India's Economic Rise and the $10 Trillion Opportunity
In the last two years, India has been the fastest-growing major economy in the world.
"Consumption is one of the most attractive investment opportunities in India"
Q 1: Your take on the recent Household Consumption Expenditure Survey? Have you observed any great change in urban or rural consumption pattern?
Learn the Magic of Self-Talk There is perpetual self-talk taking place inside all of us
We listen when our self-talk happens in our minds; we listen to whatever is imprinted in our memories and our past conditioning. Many a time we do not hear exactly what the other person is saying, and we form an opinion.