Currently, there is a great mismatch between the earnings and how the markets are behaving or have recovered after the crash. Do you feel the earnings could catch up with the market prices or does the gap between the two seem to be unreasonable to you? If we look at FY-21 as a whole, it has been a very challenging year. A lot of companies have seen a significant cut in their profits. But if we look at Q3 and Q4, there were a lot of positives that surprised us. Then, we ended the whole year with a 13-14 per cent of CAGR for the index. That was led by several sectors, some of which are very obvious like pharma. Then, there are sectors that did very well like IT and then there were certain positive surprises as well like metals. So, across the markets, we have various segments that did well and compared to initial thoughts, overall the financial year ended on a positive note in terms of the EPS growth of about 13-14 per cent. If we further deep dive into other aspects, for example into the manufacturing space, textiles and chemicals have shown very positive traction on the export side. On top of that, we have seen the government coming out with the Production-Linked Incentive (PLI) scheme, which has also led to some positivity, not only from the export side but from the import substitution perspective as well. Now, we are currently witnessing a good monsoon season for the third consecutive year, probably the longest in many years now. Global crop prices are also moving up, which bodes well for a country like India. Also, if you look at recent data points regarding the GST collection, you can see that they are back to comfortable levels. So even though we are seeing intermittent lockdowns, recovery has also been pretty fast. Hence, I feel that earnings will catch up once we see a normalisation on the ground. Already stock prices are reflecting some of
This article was originally published on August 13, 2021.
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