 "Sensex, Markets, Nifty")
Indian markets were on a roll till September this year. Corporate India was bullish, expecting a good monsoon, lower interest rates and higher disposable incomes from the Seventh Pay Commission to give a fillip to the economy.
However, three unexpected events in November have altered the landscape in a big way.
The election of Donald Trump as the US President has resulted in flight of capital from emerging markets, given his focus to get companies back to invest in the US. Second, the likelihood of more aggressive interest rate hikes by the US Fed in 2017.
At home, the move to ban high-value notes by Prime Minister Narendra Modi is the third event and has dented earnings growth expectations and sentiment. India’s earnings per share growth for FY17 are projected to be 8.5% for Sensex companies and 12.3% for Nifty firms, continuing the trajectory of disappointing earnings growth over the past few years. Sensex earnings were earlier expected to grow by 14-16%.
There is a silver lining though. While the economy is expected to struggle for another two quarters, analysts expect earnings in FY18 to grow by more than 20% on the back of normalisation of profits, particularly in sectors such as automobiles and banks. This is among the highest, compared to earnings expectations for major global markets.
India is also expected to post a higher gross domestic product (GDP) growth than most emerging and developed countries, with Bloomberg consensus estimates of a GDP growth rate of 7.5% for FY18.
A possible stimulus to boost economic growth and a reduction in the corporate tax rate in the upcoming Union Budget may also bring back the cheer for Indian companies and investors. upcoming Union Budget may also bring back the cheer for Indian companies and investors.
How major equity markets stack up
| Equity Market | Chg in currency | Estimated growth for 2017 in | |||||
| Index | Value | Chg (%) * | versus US$ (%) * | EPS (%) | GDP (%) | ||
| Brazil | Brazil Ibovespa | 60,227 | 38.9 | 21.7 | 27.2 | 0.8 | |
| Thailand | SEI | 1,543 | 19.8 | 0.5 | 10.9 | 3.2 | |
| Indonesia | Jakarta Composite | 5,297 | 15.3 | 2.3 | 20.0 | 5.3 | |
| Britain | FTSE 100 | 7,143 | 14.4 | -16.2 | 17.7 | 1.2 | |
| United States | Dow Jones | 19,763 | 13.4 | 0.0 | 11.7 | 2.2 | |
| Taiwan | Taiwan Taiex | 9,254 | 11.0 | 1.7 | 12.0 | 1.9 | |
| Mexico | Mexico IPC | 45,643 | 6.2 | -17.0 | 19.5 | 1.7 | |
| South Korea | Kospi | 2,026 | 3.3 | -2.6 | 16.1 | 2.6 | |
| India | Nifty 50 | 8,186 | 3.0 | -2.6 | 24.2 | 7.5 | |
| India | S&P BSE Sensex | 26,626 | 1.9 | -2.6 | 24.4 | 7.5 | |
| Japan | Nikkei 225 | 19,114 | 0.4 | 2.6 | 10.8 | 1.00 | |
| Hong Kong | Hang Seng | 22,001 | 0.4 | -0.1 | 9.8 | 1.8 | |
| Singapore | Straits Times | 2,881 | -0.1 | -2.0 | 5.0 | 1.5 | |
| Malaysia | FTSE Bursa Malaysia | 1,642 | -3.0 | -4.3 | 7.7 | 4.3 | |
| South Africa | FTSE/JSE Africa | 43,902 | -4.1 | 12.6 | 28.1 | 1.1 | |
| China | Shanghai SE Composite | 3,104 | -12.3 | -6.5 | 13.6 | 6.5 | |
| Russia | Micex | 2,232.72 | 26.8 | 17.8 | 11.6 | 1.1 | |
| * change is year-on-year | |||||||
| Index value as on December 30, 2016 | |||||||
| List sorted on the basis of change in index value | |||||||
| EPS: Earnings per share | |||||||
| GDP: Gross domestic product | |||||||
| India GDP forecasts & EPS estimates are for FY18, rest for the calendar year | |||||||
| Source: Bloomberg | |||||||
| Compiled by BS Research Bureau | |||||||
