MC Markets Graphixstory: India’s earnings explosion points at bull run is likely to stay

Data shows that the total profit of top 500-odd companies has grown nearly three-fold in comparison to pre-Covid levels — from Rs 3.5 lakh crore to about Rs 10.5 lakh crore. In the same period, the Nifty 500 index has zoomed only about 90 percent, lagging far behind the earnings growth.

There is an age-old adage: the market is slave to earnings. If you are also a believer in this, then the stupendous rally seen in headline indices as well as the broader market during the last three years should not surprise you.

Data shows that the total profit of the top 500-odd companies has grown nearly three-fold in comparison to pre-Covid levels — from Rs 3.5 lakh crore to about Rs 10.5 lakh crore. In the same period, the Nifty 500 index has zoomed only about 90 percent, lagging far behind the earnings growth.

The superlative growth in earnings has also resulted in P/E contraction, making some fund managers further bullish on India as they believe the market will continue to play catchup to earnings.