Investments, Merchandise Exports Driving Economic Recovery; Related Stocks Reasonably Valued: ICICI Securities
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ICICI Securities Report
Despite the high price-to-earnings ratio (trailing 29.9 times, forward earnings at 20.4 times), the trailing price-to-book ratio is still reasonable at marginally above the long-term average of 3.1 times, which reflects two decade low profitability in terms of trailing return on equity at 11.9% for the Nifty50 index.
However, for FY21, corporate profit cycle in the listed space is turning and improved to a seven-year high of 3.1% of gross domestic product while the earnings growth of the Nifty50 index defied a technical recession to grow in mid-teens largely driven by cyclicals.
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