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Earnings, reforms will be next drivers for market: Experts

An explosive growth in earnings will be the biggest driver of the market for the next two to three years, feels the panel of experts who participated in a discussion at the CNBC-TV18 Investor Summit to mark the 15th anniversary of the channel. They were Ridham Desai of Morgan Stanley, Neelkanth Mishra of Credit Suisse, Abhay Laijawala of Deutsche Securities and Ratnesh Kumar of Standard Chartered. The discussion was moderated by CNBC-TV18’s Latha Venkatesh.

Earnings apart, other factors like economic reforms and falling commodity prices will also give a leg up to the market, the experts said.

Desai estimates the aggregate earnings of Sensex companies at Rs 2500 in FY17, that too on a conservative basis. This is nearly 55 percent higher than Morgan Stanley’s FY15 SEnsex EPS target of Rs 1600.

Ratnesh Kumar feels it is no more a good idea to think of earnings growth in a linear manner, as earnings growth is now at an inflexion point.

Neelkanth Mishra feels the RBI today did the right thing by keeping rates unchanged. He said the RBI cannot afford to cut rates now and regret it later, he said. The market had to be cautious about the implications of falling commodity prices, since 56 percent of Nifty earnings was now dollar denominate, Mishra cautioned.

“I will not be squeamish about valuations,” says Mishra, adding “if the world is worried about deflation, it will throw money at it.” Mishra feels large dollops of this liquidity should find its way into markets like India which are growing at much higher rates than the rest of the world.

Desai is betting on good quality banks and good quality FMCG companies. He is more bullish on midcaps, which he feels will outperform the large caps over the next few years.

Laijawala is bullish on consumer discretionary, financials and logistics shares. He is particularly bullish on financials, as he sees a transformational shift, as investors switch from physical assets to financial assets.

He says this is a good time to be betting on some of the PSU bank stocks, where the risk reward ratio is attractive.

Ratnesh Kumar sees a compounded annual growth rate of 20 percent from equities over the next 2-3 years.
 

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