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Last Updated : Mar 12, 2018 10:31 AM IST | Source: Moneycontrol.com

This is a bull market correction! Nifty FY19 target revised downwards to 11,500: Edelweiss

Edelweiss expects the Nifty earnings per share (EPS) of FY18/19/20 to be 500/600/700. The brokerage firm is of the view that there are short-term risks which are likely to lead to correction and consolidation in the short term.

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The Nifty50 index slipped by about 8 percent from the record highs so far in the year 2018 but the bull markets still remain intact, Edelweiss said in a strategy note authored by Sahil Kapoor, and Shobana Krishnan.

This short-term correction seen in Indian equity markets, tough severe will only be a speed bump in the ongoing bull market in India, it said.

Backed by the revival in global earnings. MSCI World EPS indicates CAGR growth of 19-20 percent by FY20. This is likely to get replicated in India which is expected to see an earrings revival in FY19 to FY21, added the note.

Edelweiss expects the Nifty earnings per share (EPS) of FY18/19/20 to be 500/600/700. The brokerage firm is of the view that there are short-term risks which are likely to lead to correction and consolidation in the short term.

However, the long-term bull market is still intact and will exert itself once this short-term correction plays out. Eventually, the correction will provide an opportunity to enter sustainably profitable business with a lot of margin of safety.

Edelweiss revises their Nifty target price for FY19 to 11,500 from 12,000 earlier giving it a PE multiple of 16.5, 1-Yr Forward at an EPS of Rs 700 for FY20.

What are the macros suggesting?

India is gaining share in World GDP (on a Purchasing Price Parity basis) and is supposed to be the third largest economy by FY20. Fiscal Consolidation in India till FY17 has been better than its EM peers.

The government has been performing a fine balancing act by keeping subsidies flat and revenue collections especially direct tax collections have been steadily going.

Fiscal deficit target for FY19 stood at 3.2 percent of GDP and 3.5 percent of GDP in FY18. Any shortfall in revenue collections due to GST and expansion in expenditure led to slippage of fiscal deficit target.

DBT Efficiency Gains had reduced leakages and increased impact of fiscal stimulus. Governments thrust on rural and infrastructure is likely to boost consumption and private capex respectively.

Broad-based earnings recovery, revival in growth, higher government expenditure and strong domestic & foreign inflows should keep the bull market intact in India, said the note.
First Published on Mar 12, 2018 10:29 am
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