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Last Updated : Jan 07, 2020 05:08 PM IST | Source:

Tata Mutual Fund CIO Rahul Singh expects Nifty earnings growth to be between 10-12% for FY21

He also said it is the ‘right time’ to look at mid caps, and even more for looking at small cap stocks as they are expected to deliver robust returns going ahead.

Tata Mutual Fund is optimistic about the market's movement, and expects earning growth to be in the range of 10-12 percent in FY21.

“Core earnings have already seen a steep cut in Nifty EPS and the downgrade cycle is nearly complete. Excluding the earnings corporate of banks, the growth rate will be in the range of 10-12 percent, in line with the nominal GDP,” said Rahul Singh, Chief Investment Officer-equities, Tata Mutual Fund, adding that including corporate banks the earnings growth will be around 18-20 percent.

“If our nominal GDP growth is around 5.5-6 percent, and we add inflation, it will come to around 10-12 percent earnings,” said Singh.

Currently, FY20 Nifty EPS (earnings per share) is  at Rs 487 and at the start FY20, it was at Rs 625.

He also said it is the ‘right time’ to look at mid caps, and even more for looking at small cap stocks as they are expected to deliver robust returns going ahead.

Singh said the fund house is also increasing the share of mid caps in its portfolio.

In 2019, while the Nifty mid cap index fell around five percent, the small-cap index was lower by almost 11 percent. However, the BSE Sensex rose over 14 percent.

Singh said that with the expensive valuations of some frontline stocks and on hopes that the government may undertake more reforms, this calendar year will be good for the mid and small-caps.

“Mid cap valuations had touched a premium of 40 percent to Nifty 50, and now, mid cap companies are at 10 percent discount to large caps. This kind of discount was last seen in 2010. Going forward, I do not see mid caps largely underperforming large caps,” Singh said.

Singh said the rural economy is likely to revive over the next two quarters, and he also saw the pace of government reforms to pick up, starting with the Budget, giving a fillip to the equity markets

“The monsoon was good and rabi sowing is going on well. So from a rural income point of view, we are seeing a bounce back in the March and June quarter,” Singh said.

“If you go back and see, the slowdown started with autos. So the kind of decline you saw is not happening any more, and because of BS VI transition, we are looking at the June quarter for a recovery,” said Singh.

Singh said that automobile sector is the main indicator for gauging recovery.

Singh pointed out that if risk aversion in the real estate sector reduces, and construction restarts, it will be positive for the rural economy as almost 50 percent of rural employment is in construction and real estate.

Real estate market was also frozen because of the NBFC crisis, said Singh.

He expects a pick up in the investment cycle over the next 6-8 months, which will be positive for both the Indian economy and markets.

“Our economy cannot just run on consumption, it will need a pick up in the investment cycle,” said Singh .

Singh was speaking at an event to launch Tata Quant Fund that uses artificial intelligence. The new fund offer of the scheme is open from January 3 and will close on January 17.

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First Published on Jan 7, 2020 05:03 pm
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