A sharp rally in domestic stocks from June lows has once again rendered Indian markets expensive to their emerging-market (EM) peers. The 12-month forward price-to-earnings (P/E) multiple for the Nifty50 Index is around 20.6x - 82 per cent higher than 11.3 per cent for the MSCI EM Index. India's valuation premium has hit a five-month high. This is on the back of sharp outperformance to EM and global peers from June lows and also due to earnings downgrades, following the April-June quarter of 2022-23 earnings.
The failure of SVB was due to idiosyncratic reasons, but shows how higher rates can expose fault lines in unforeseen places, observes Neelkanth Mishra.
It's raining IPOs, with eight issues hitting the market in a span of six days. However, the pace of new filings points to a deluge during the latter part of the year. So far this year, 58 companies have filed their draft red herring prospectus (DRHP) with the market regulator for initial public offerings (IPOs), exceeding the combined tally of 50 in the last two years. Industry participants said the filing count could cross 100 this year, setting a new benchmark in terms of amount mobilised in a calendar year.
10 high dividend paying stocks across sectors that are expected to maintain or even increase their pay-outs in FY23 thanks to faster earnings growth in the last four quarters.
The Sensex is on course to ending calendar year (CY) 2019 at a price-earnings (P/E) multiple of 29x, the highest in 25 years. Current valuations are, however, lower than those seen in the early 1990s. The Sensex has risen close to 14 per cent in the last 12 months, while the index underlying EPS dropped 6.7 per cent during the period.
Larsen & Toubro (L&T), India's largest construction and engineering player, has lost as many as 14 large orders in the country because companies that don't possess adequate technical expertise and experience, of late, have won the projects by bidding lower, claimed A M Naik, non-executive chairman of L&T. But the company has made up for the losses by winning projects overseas, where it has acquired a sizeable market share amid tough competition from large global players, he said.
'Our preference remains for the less-expensive industrial stocks, which are showing good earnings momentum.'
Technology firm Wipro has a "high probability" of getting included in the benchmark Sensex, while two-wheeler major Bajaj Auto is the "most likely" deletion candidate, according to an analysis done by Brian Freitas, an analyst at independent research provider Smartkarma. The changes to the index will be announced mid-November, and will become effective from December 17. The December review uses the 6-month average market capitalisation and trading turnover data between May 1 and October 31 to determine changes.
The country's top FMCG stocks, such as Hindustan Unilever, ITC, Nestl, Britannia, Godrej Consumer Products, and Dabur, among others, are currently trading at around 41x their trailing 12-month earnings, down from their peak P/E multiple of around 48x at the end of December 2018.
'Valuations were depressed at 8,000 (Nifty 50 index) levels. It was a free ride to 12,000 levels.' 'What went down had to come up. Now fundamentals have to support further gains.'
The Nifty Bank index has come off 15 per cent from its peak in February, underperforming the benchmark Nifty which is down 6%.
Smaller stocks continue to shine at the bourses. The BSE MidCap index is up 18 per cent since the beginning of January this year against a 5 per cent rise in the Sensex during the period. With the current rally, the mid-cap index has doubled in value since the end of March 2020 against a 70 per cent rally in the Sensex during the period. On Tuesday, the mid-cap index closed at 21,232, as compared to 17,941 at the end of December 2020. In the same period, the benchmark index moved from 47,751 to 50,193.
In a bull-case scenario it sees the Sensex at 61,000 levels, while it's bear case scenario pegs the Sensex at 41,000 levels by December 2021.
The FPI holding in India's top 100 companies, which are part of the Nifty 100 index, declined to 24.23 per cent on average at the end of March this year, from a high of 27.5 per cent at the end of March 2021. This is the lowest FPI holdings in India's top listed companies in at least three years. A general sell-off by FPIs has weighed on stock prices and the benchmark S&P BSE Sensex is down 8.5 per cent, from its 52-week high made in October 2021. Most analysts expect FPI flows to remain weak in FY23 as well, given rising bond yields in the US and an expected earnings slowdown in India due to high inflation and commodity prices.
'Today, there is no easy money to be made after the run-up in equities.'
The relentless rally in small- and mid-cap stocks continues as large-caps show signs of fatigue. In July, the Nifty Smallcap 100 rose 8.1 per cent, extending its year-to-date (YTD) gains to 48.5 per cent, while the Nifty Midcap 100 added 3.1 per cent, taking its YTD rise to 33.5 per cent. On the other hand, the Nifty50 remained unchanged for the month, with YTD gains of 12.7 per cent.
BSE-listed companies' market capitalisation reached Rs 197.7 trillion on January 21, against India's nominal GDP of Rs 190 trillion during 12 months ended December 2020.
Players like UltraTech Cement more expensive than ITC and HUL; others catching up fast.
'There is no need to do anything, let your SIPs get deducted every month, and stick to your allocation between equity, fixed income and emergency funds and your risk covers.'
With its fleet of nearly 1,000 electric three-wheelers in Delhi-NCR, it moves around 100,000 commuters daily. The company will use the funding to rapidly increase its fleet size within Delhi-NCR as well as other key cities around the country.
After years of disappointing growth, the economy and the markets are poised for a breakout, notes Akash Prakash.
A normal monsoon, softer interest rates and inflation, pent-up demand, along with mild budgetary support may help growth pick up in coming quarters.
Market cap of government companies has remained unchanged in the past 8 years.
While the macroeconomic parameters remain weak, we believe the worst is behind us. The markets remain largely driven by liquidity
Market participants are hoping for a few tweaks on the taxation front which will encourage consumers and businesses to spend.
'The news about the new virus strain in the UK provided them with an opportunity to take money off the table.'
The Bombay Stock Exchange benchmark Sensex has declined 17 per cent in this calendar year and has underperformed the US and European markets.
It is not clear as to whether we are in a bubble in technology stocks. What is clear, however, is that there is no reason why this potential bubble will pop anytime soon, notes Akash Prakash.
'The velocity of the market correction in September was so fierce that 9 stocks declined for every one that advanced,' reveals Samie Modak.
The company has a valuation of Rs 2.22 trillion, up from Rs 1.33 trillion a year ago.
The benchmark Sensex companies' underlying earnings per share are down 3 per cent (on a cumulative basis) since January 2015, against 25 per cent rise in the index value during the period
Sensex is now as expensive as in early 2008
Sensex and Nifty have been volatile in the past one year on domestic and global worries.
The mid- and small-cap indices had a dream run between January 2017 and January 2018 - zooming 48 per cent and 56 per cent, respectively.
Government-owned companies are more generous in rewarding their shareholders with dividends.
The buyback price is at around 28 per cent premium to the current market price of Rs 67 on the Bombay Stock Exchange
While few doubt stocks here are quoting at price-earnings ratios which are higher than those in peer countries, India's growth prospects are the key differentiator.
Asian countries (ex-Japan) including India and China, are now the most expensive region in the world as strong inflows into Asian funds are stretching valuations, according to analysts. Yet, Asian equities continue to attract big money. The region is trading at 29 per cent premium against the developed world and 14 per cent against global emerging markets (GEM) on price to earnings (P/E) multiple, said a report by the Citigroup.
The risk-reward ratio could turn adverse for foreign investors if corporate earnings disappoint by wide margins, or if crude oil prices spike in the international market, putting pressure on the rupee-dollar exchange rate.
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