The good thing which is in favor of equity markets is that micros are looking good and the earrings trajectory is looking better, Dhiraj Relli, Managing Director & CEO, HDFC Securities said in an exclusive interview with Moneycontrol’s Kshitij Anand.
FY18 has given about 10 per cent kind of return considering Sensex or the Nifty. To that extent, the gains that we saw were largely led by liquidity and in between saw spikes. We also witnessed buoyancy in the primary market, more money flew in from domestic investors etc.
But, keeping all that aside – we know that in the short term markets are driven by sentiments, in the midterm it is driven by liquidity and in the long term, markets are driven by earnings growth.
At the end of the day, what matters is the earnings growth. Indian market always does well when we see good micros and not so great macros. If we look at the macros six months ago, it was fantastic which not the case right now.
The good thing is that micros are looking good and the earrings trajectory is looking better. Historically speaking, when we look at earnings from the year 2001-2008, India Inc. registered good 18 percent CAGR in the earnings whereas from 2009 onwards to till last year, we have seen earnings growth CAGR of 4.5 percent.
In the last so many years we have not seen earnings coming in. But, in the last two quarters, we have seen that the trend is somewhat changing or reversing (fewer banks).
Growth which comes on the back of earnings is far more stable and far more sustainable than the liquidity-driven growth in the market. That is the reason why I believe that FY19 could be better. If we look at the collections in the GST, direct collections – both would be better.
Companies are also pricing the issue to perfection. To that extent, investors did not get any listing gains. Overall, I feel that the trend in primary markets will remain somewhat subdued and it will not be as great as it was last year. But, quality issues will sail through.
From there on, RBI and the government came out with various measure to solve the problem. The good thing is that we are at least recognizing these NPAs and they are coming into public domain otherwise they were always there which is a good thing.
Investment & trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance.
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