IDFC Securities Sees Strong Pick Up In Earnings From April
IDFC Securities expects Nifty 50 earnings to register 15% CAGR over the financial years through March 2019.
IDFC Securities expects a sharp pick up in corporate earnings from April onwards, despite mild downgrade risks owing to GST and bank recapitalisation led concerns.
The brokerage firm sees two themes predominantly playing out as the economy recovers:
- Asset-heavy and export-oriented industries would do well as the global economy recovers, and consequently, the valuation gap between asset-heavy and asset-light industries would narrow.
- Consumption is the strongest component of GDP and discretionary consumption especially continues to find growth impetus from retail credit, which we feel would continue in near term.
Besides, it expects the NSE’s benchmark Nifty 50 earnings to register a compounded annual growth rate of 15 percent over the financial years through March 2019.
Though the reforms like GST implementation, bank recapitalisation and increased focus on digitisation come associated with short-term costs, we expect them to put India on an accelerated growth trajectory from April onwards. Hence, we reiterate our March 2018 Nifty target of 11,300.IDFC Securities Research Report
Commenting on the global scenario, IDFC said 2018 will be marked by balance sheet tapering by major central banks, which will define the capital flows to emerging markets in the near term while the weaker emerging markets bear the brunt.
The brokerage said that Indian companies will be better positioned in this scenario.
The research company is bullish on engineering and capital goods, construction, metals and mining, oil and gas, consumer goods, automobiles, media and pharmaceuticals sectors, as it believes that the recent reduction in tax rates of companies in the discretionary consumer sector would boost the overall consumption.
Besides, IDFC Securities upgraded Bajaj Auto Ltd. to ‘Underperform’ in 2018. The brokerage firm earlier had a ‘Sell’ call on the stock, and expects its shares to reach Rs 2,900 level in the next 12 months.