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One theme that will play out throughout next decade is that of the big becoming bigger and concentration of market share and profit pool in favour of big guys in every sector, says
Gautam Duggad, Head Of Research - Institutional Equities,
How does earnings upgrades and earnings delivery move in tandem with the market? Where are we on the cycle right now?
Tempting as it may sound, one does want to compare this with the 2003 or 2008 cycle but numbers belie that because 2003-2008 was a very different period we have seen 25% earnings CAGR in that five-year period. Global markets were buoyant, everything was working well, fiscal consolidation was also happening and the government was also spending on investments and consumption was also doing well. That was an ideal period as far as the cycle is concerned.
Gautam Duggad, Head Of Research - Institutional Equities,
Motilal Oswal Strategy Report is something which almost the entire market watches out for very closely. How are you looking at the Nifty earnings picture, the Nifty EPS for this year and next year and even one year ahead?
As far as earnings are concerned, after five consecutive years of earnings downgrade, last quarter was the first quarter where saw a beat in earnings and then the first earnings upgrades after many years. I remember we had upgraded earnings by 9% at the end of the second quarter result season in October-November and as we step into this third quarter, when we released our preview 10 days back we had again upgraded numbers by 3% to 4%. So between the two quarters, we have seen a 12% earnings upgrade on Nifty for FY21 and FY22. As far as EPS is concerned, we are at Rs 516 for FY21. This number was Rs 454 at the bottom in March-April and from there, we have come to Rs 516.
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Illustration by Siddhant Jumde
Very often, headline numbers do not divulge too many details. To let the numbers do the talking, it is important to dive deeper. Also, it is difficult to accurately estimate any measure without studying its long-term trend and comparing it with other relevant indicators. Business Today looks at some such indicators such as price-to-earnings (P-E) ratio, market cap-to-GDP ratio and corporate fundraising to gauge market sentiment and portray the state of the economy.
Fundamental statistics such as P-E ratio are popularly studied in two forms, trailing and forward, to determine the valuation of a stock or an index. Trailing P-E is calculated by dividing the current market value by earnings per share over the previous 12 months. Forward P-E looks at a company s likely earnings per share for the next 12 months. A