Markets lack the strength to sustain new highs till earnings revive: Marathon Trends' Atul Suri

Even if we make new highs, it will not sustain, Suri said.

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Indian stock markets are unlikely to sustain fresh highs until corporate earnings catch up, Marathon Trends' Atul Suri said during a panel discussion on Network 18's Reforms Reloaded event in New Delhi on September 22.

The veteran investor said Nifty 50 had hit new highs exactly a year ago in September, but since then it has fallen to 22,000 levels, as earnings did not justify the valuations. "That was the first hit. I think that that was a time when people suddenly started realizing that earnings is not what is being priced in," Atul Suri added.

Following this drop a year ago, several factors continued to challenge the markets, according to Suri. “Then, we had the India-Pakistan border (tensions) and the market gapped up. We took a second hit. Then again, as the world continued to rally, we again attempted. And now, we've had this tariff issue. So, we've had three very big hits as far as the index goes." The market expert added that compared to the world, domestic equities have performed "phenomenally", as India had almost a dip, a second attempt, and now it is struggling to attempt new highs.

The sustainability of any dash to record highs will depend on earnings revival, said Suri. “Till earnings do not come, we do not have the legs to make new highs. Even if we make new highs, it will not sustain. You can have false breakouts. Why are some false breakouts? Why do some succeed? Ultimately, it is earnings, just as in the case of a stock."

Read More: GST reforms welcome, but will take time to boost corporate earnings, say market experts

Atul Suti said the GST rate cuts have the potential to support future growth but cautioned that results will take time. “This whole GST reform is very interesting and timely… But will it pan out? This is going to take time. So, I feel that that is definitely the silver lining, if it propels that earnings growth then I guess India has a very big catch up to do on absolute," Suri said.

The veteran trader, however, is optimistic for the medium term, adding that he foresees that a 20% rally in equities in the next one year from current levels, provided these reforms and the ones in the pipeline actually play out, and trickles down into GDP growth and corporate earnings.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.