Beware of highs

Earnings growth may not support stock prices

India’s stock markets soared to new highs last week, shrugging off worries around a possible debt default in China’s real estate behemoth, Evergrande. The Sensex crossed 60,000 and the Nifty touched nearly 18,000. However, some caution is in order as the positive factors, which coincided in sustaining this rally, may not remain in play much longer. Earnings growth rates may fall, and the fear of a Chinese real estate implosion remains. Hence, it may be appropriate to temper optimism. In the past 12 months, the Sensex has returned over 60 per cent, and the Nifty slightly more. But these returns