See earnings growth in double-digits in FY17: JM Financial

India's growth is largely being driven by global factors at the moment, said Suhas Harinarayanan of JM Financial Institutional Securities.

Also, domestic factors like good monsoon and several government initiatives (like the GST Bill) are contributing to India's growth, he added.  

He said: "The markets are now stable and some domestic factors are being priced in."He expects earnings growth to be in double-digits in FY17.Below is the verbatim transcript of Suhas Harinarayanan's interview to Reema Tendulkar and Nigel D'Souza on CNBC-TV18.Reema: The last time we spoke to you, it was January and after that we saw a cascading fall for the equity markets only to recover the earnings picture picked up for the Indian markets at least in the quarter gone by, we have got the monsoon progressing well, the Seventh Central Pay Commission (CPC) has been announced, what is the call on India now?A: Right now the call is largely going to be driven by global factors. A lot of the domestic factors whether it was good monsoons, the government spending numbers are already on track and when we look at some of the industrial high frequency indicators, the numbers aren’t dropping anymore in the fashion that we used to see maybe about a year back or even six months back. They are far more consistent in the way they are, they are far more stable.As a result, the last quarter numbers except for the public sector banks, which probably had to take down bigger write-downs, generally the earnings were stable. The markets also has gone up, it is at around 17-17.2 to one year forward which is not exactly cheap. But I guess recent movement has largely been driven by global factors and that would be a predominant factor driving the markets in the coming months. The only factor to probably look from a short-term domestic factor would be the passage of goods and services tax (GST) just from a sentiment factor but I think a lot of the other favourable domestic factors seem to be slowly getting priced in.Nigel: With regard to valuations, I wanted your view on that. Earnings per share (EPS) growth -- we haven’t seen it for the last few years. You believe that we are going to be growing at a double digit, could you tell us what your EPS estimates maybe for FY18 that seems a fairer time horizon and when exactly does this market become expensive, we are trading at 17 times, 20-21 times do you think that is a far cry?A: We should not look at the price to earnings (P/E) in isolation. We should look at the fact that the ROEs are fallen so is the cost of funds globally. I think considering everything, we are no longer in the value zone by any stretch of the imagination.When we look at earnings growth, we are in the double digit camp clearly for earnings growth for FY17. FY18, as of now we will built in a double-digit growth there as well but let us pass FY17 first where we have built in a double digit earnings growth and on that basis, we are trading at about 17 times. So which is why I said, the market looks fairly valued from hereon, liquidity factors probably take it higher. We do not expect any significant earnings surprises to be driving the market.Reema: You said that GST could be the trigger for markets but all the other triggers seem to be largely priced in which means that you don’t see further run up in monsoon plays which have done very well or consumption stocks which have gone up on the back of the CPC, all those triggers are already priced in and there is no more upside left in these names?A: It is difficult to say precisely how much is priced in and how much is not priced in. What I was hinting at was that they are slowly getting priced in probably clearly more priced in than they were when the monsoon reports first came out or before the Seventh CPC first came out. They are slowly getting more priced in than something like GST, which as I mentioned is more of a sentiment positive.At the end of the day, the broader markets are still going to be driven by global factors. What these individual factors impact clearly are individual stocks. For example, rural and monsoon are clearly   interdependent and we conduct these rural surveys every six months and our latest surveys did point out to the fact that a monsoon improvement can improve agriculture incomes by close to 20 percent.So that will have its own benefits. There is a broader markets from nowon, you could have certain individual stocks, which are driven by some of these individual factors going up even further.Nigel: I was looking at your model portfolio, I am not finding much of a mention of a utilities in  particular cement, cement has had a big run, what is your view on that?A: We do have one of the stocks in the cement sector so we probably have been backing the sector. Right now, maybe they do look a little pricy at this stage.