India's corporate earnings outlook appears to be better than most emerging markets (EMs) and developed markets (DMs) for FY23-25, thanks to its strong macroeconomic position.
The consensus earnings per share (EPS) growth estimates for the benchmark Nifty50 for FY23-FY25 are higher than most emerging market and developed market economies, said a Mint report.
However, sticky inflation, monetary tightening and geopolitical tensions remain key risks which could dent the earnings outlook.
The rich valuation of the Indian market is also a serious concern.
"India’s earnings growth seems more promising, but its valuation multiple is expensive. At a one-year forward price-to-earnings multiple, MSCI India trades at 17.5 times, showed Bloomberg data. This is a premium to the MSCI Emerging Markets index and MSCI Asia Ex-Japan index," Mint reported.
India’s valuation has moderated from its recent peak but is still discomforting considering that the global economy is still under pressure.
Mint quoted Deepak Jasani, head of retail research at HDFC Securities, saying that for now, India’s premium to emerging and developed markets is likely to continue. This is because global investors are increasing exposure to emerging markets and India could benefit from it due to better growth prospects.
Brokerage firm Motilal Oswal Financial Services believes that India Inc.'s profitability moderated in the December quarter of the financial year 2022-23 (Q3FY23) due to higher commodity prices even as financial and auto companies performed better during the quarter.
"We have pruned our FY23E Nifty earnings per share (EPS) by 1 percent to ₹812 (earlier: ₹820) due to a notable earnings downgrade in metal stocks. We now expect Nifty EPS to grow 11.6 percent in FY23. Our Nifty EPS for FY24E remains largely unchanged at ₹993, as downgrades in Reliance Industries, Bharti Airtel, Tata Steel and JSW Steel are offset by upgrades in ONGC, SBI, Tata Motors, and Coal India," said Motilal Oswal.
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