Currently, Indian equities are available at more than 20 times one-year forward earnings.
Going by earnings expectations for 2022-23, Indian equity markets look fairly priced if not expensive at current levels, James Sullivan, managing director and head of Asia-Pacific equity research, told CNBC-TV18 in an interview.
Sullivan highlighted that if earnings expectations for energy and metal companies are excluded, estimates for 15 percent growth for the rest of the Nifty 50 pack are demanding and there is a risk of disappointment on that front.
Despite the volatility triggered by the interest rate hike by the US Federal Reserve and the geopolitical crisis in Eastern Europe in the quarter ended March, domestic benchmark indices were largely flat for the quarter.
In fact, earnings per share estimate for Nifty 50 companies saw a 5 percent jump likely led by oil and gas, metals, and financial services companies. Currently, Indian equities are available at more than 20 times one-year forward earnings despite a near 21 percent contraction from a peak valuation of over 22 times.
Sullivan’s skepticism for the ability of corporate Indians to deliver on the lofty expectations of investors stems from signs of global slowdown due to pandemic-related supply chain issues, Russia-Ukraine war, and surging energy prices.
Sullivan said that his team has reduced global GDP expectations by 170 basis points in light of the developments over the past six weeks. In the US, the spread between the 2-year Treasury Bond and 10-year Treasury Bond, a key indicator of economic recession, has turned negative spurring concerns of an upcoming recession in the US.
Despite the expensiveness of the domestic market, Sullivan highlighted several sectors where there is scope for meaningful re-rating. The JP Morgan strategist said that he remains overweight on Indian financial services companies and some pockets of the energy and industrial sectors.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
`); } if (res.stay_updated) { $ (“.stay-updated-ajax”).html(res.stay_updated); } } catch (error) { console.log(‘Error in video’, error); } } }) }, 8000); })
