Gold Silver Reports — Time Correction Has Started in Indian Markets: Credit Suisse — GROWTH PANGS Confidence in future earnings and broader economic revival, needed for broader markets to do well, unlikely before the end of this year, says brokerage
A `time correction’ has started in the Indian markets; and for the broader markets to do well, confidence in future earnings and a broader economic revival is needed, which are unlikely before the end of this year, said Credit Suisse in a note.
“Over 14% growth in FY17 Nifty EPS (earnings per share) is predicated mainly on profit recovery in consumer discretionary, and reversal of losses in MaterialsPSU Banks. For broader markets to do well, confidence in FY18 earnings and a broader economic revival may be necessary; (but) unlikely before end-CY16,“ the brokerage said in a note on August 24.
For the last two months, the brokerage has been advising caution as evidence of a pick-up in the economy is still needed and earnings still need to catch up. Also, the year-on-year slowdown in oil, cement and power sector growth is also likely to last till the end of the current calendar year, the report said.
Credit Suisse estimates FY17 Nifty earnings per share at `444.This implies a 10.1% cut from the estimate of `494 at the beginning of 2016 but the brokerage said that the revision would have been less if not for the one-off provisions in banks.
Besides Credit Suisse, HSBC is also expecting some correction in the stock market, which has rallied more than 20% since March.
HSBC’s note, also dated August 24, said that a brief corrective phase could set in Indian mar kets as near-term triggers run out and profit booking sets in due to easing of passive foreign inflows.
“(We see) limited near-term upside unless fresh triggers earnings begin to see a leg up from Q2, said HSBC, which has an overweight rating on India but its 2016-end Sensex target of 28,500 suggests little upside. — Neal Bhai Reports