Moneycontrol Pro Panorama | Markets and investors look optimistic with strong start to FY24

The last quarter results of FY23 has helped improve market sentiment, especially among the analyst community.

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The FY23 earnings season is ending on a strong note reflecting the optimism in the markets. Despite a high chance of a recession in the developed world, Indian companies continue to post robust numbers.

The profits of NSE200 stocks have grown by around 9 percent (+21 percent ex commodities) according to an ICICI Securities report. The numbers were driven by financials, reliance, autos and technology. Sectors that were a drag are commodities like metals and cement. However, lower commodity prices helped improve margins across many sectors.

The number of companies outperforming analyst expectations is still higher than those meeting it or is below their expectation.

According to Jefferies, of the 63 companies under its coverage that have announced their results, 49 percent came above estimates, the highest in four quarters, while 37 percent came below. The remaining 14 percent were in line. Earnings upgrades (49 percent) were the same as the earnings downgrades (49 percent); though the upgrade percentage is highest in the past six quarters, signifying that momentum is picking up in corporate India.

Markets have appreciated the improving scenario in corporate India and the overall economy. Foreign fund inflows have added to the strong domestic flow to bring markets close to their previous highs.

A Kotak Institutional Equities report expects improving Indian macro with peaking interest rates and better external position (BoP) to percolate down over the next 2-4 quarters.

While the broad numbers are good, is there still room for share price improvement?

Kotak says that the Indian market is trading at reasonable valuations compared with recent history. However, most growth stocks, especially in the consumption, investment and outsourcing space, are trading at expensive valuations. Financials remain reasonably valued and appear attractive in the context of a likely healthy credit cycle over the next 1-2 years.

ICICI Securities says the sharp rally in Indian stocks since the March '23 lows has widened the valuation premium of NIFTY50 over the MSCI EM index to around 57 percent, which is closer to the long-term median value of around 45 percent but sharply lower than the recent peak valuation premium of 93 percent seen in Oct’22.

Jefferies has forecast earnings growth of 20 percent in FY24. Strong order booking and pre-sales by the capital goods sector and real estate companies point to positive cyclical trends.

The last quarter results of FY23 has helped improve market sentiment, especially among the analyst community.

However, global economies can spoil the party. Mohamed El-Erian in his article writes about steps that the US banking system needs to take to avoid another banking crisis.

Investing insights from our research team

Cholamandalam Investment and Finance Company — Is the premium valuation justified?

Aarti Industries: Is it time to look past inventory headwinds?

Mahanagar Gas: Surprise performance sets tone for FY24

DCB Bank: Risk-reward extremely favourable, buy for long term

What else are we reading?

Bangladesh vs India per capita GDP: Setting the record straight

Manipur: the horrors of identity politics

King Dollar and Queen Gold are here to stay

Green Pivot: A collaborative strategy critical to critical minerals

Chart of the Day: Mongolia is the new Australia in supplying coal

Swiggy Saga: Valuing new age companies is turning out to be a joke

India needs an emissions trading system to achieve net zero goals

Mission Rajasthan: PM Modi plots BJP’s comeback via tribal votes on Karnataka polling day

What central banks need to consider when making monetary policy in times of war and crisis

Technical Picks: Tata Power, Larsen & Toubro, MSFL, IOC and Lead (These are published every trading day before markets open and can be read on the app). 

Shishir Asthana Moneycontrol Pro