India Faces Risk of Earnings Downgrades
World Economy

India Faces Risk of Earnings Downgrades

Global brokerage firm HSBC on Monday said it is ‘underweight’ on Indian equities and sees risk of earnings downgrades going forward as the market is trading at a significant premium.
According to HSBC, though progress has been made on structural reforms across sectors, equities are not likely to benefit from this as they are trading at a significant premium, PTI reported.
“Progress has been made on structural reforms, especially in the mining, power and road infrastructure sectors, and monetary policy will remain accommodative, still we chose to remain underweight as earnings expectations remain unrealistically high and the market trades at a significant premium,” HSBC said in a research note on Monday.
On the positives, it said, the incremental reforms via executive action have been more successful. A strong partnership between the government and the central bank is culminating in reforms in the banking sector.
Moreover the government has also widened foreign direct investment limits and, by remaining fiscally prudent and keeping the increase in agriculture support prices in check, it has chosen prudence over populism, which has helped India retain macro stability.
“While we acknowledge some potentially positive developments, this is not yet the time to add to Indian equities. We therefore remain underweight India,” the report noted.
Market benchmark Sensex has lost 5.52% so far this year and is hovering around 24,700-levels. The 30-share index had lost over 5% in calendar year 2015.
The report said though the government has stuck to its fiscal consolidation target and has addressed rural growth issues, benefits to the private sector have so far been limited largely owing to weak business sentiment, stressed assets in the banking system and the slow implementation of infrastructure projects.
“In this context, the consensus forecast for 18.3% earnings per share growth is unrealistically high. Thus, we expect to see more earnings downgrades ahead in India in 2016,” it said adding “politics and reform are not the real risks to Indian equities. We think high earnings expectations are the problem”.
Meanwhile, Indian bourses closed Monday’s trading session with sharp gains amid value buying and positive global markets.
The Sensex at the Bombay Stock Exchange ended 348 points higher at 25,022 and the Nifty at the National Stock Exchange closed 116 points higher at 7,671.
In the broader markets, BSE Midcap index climbed 1.1% while Smallcap index gained 0.6%. All the BSE sectoral indices closed in the positive zone with Teck index leading the gains, up 2.3%.
Top gainers in the Sensex-30 pack: Adani Ports (up 4.5%), Bharti Airtel (up 4.2%), BHEL (up 4%), Tata Motors (up 3.7%) and Wipro (up 3.4%)

Short URL : http://goo.gl/4rAKi5
  1. http://goo.gl/HMpRZz
  • http://goo.gl/vTiwbZ
  • http://goo.gl/lUZjKs
  • http://goo.gl/ENHPLk
  • http://goo.gl/LAiVFa

You can also read ...

More and more Thai merchants are integrating WeChat Pay and Alipay’s systems to cater to tourists.
The internet has changed the way most people live. Through...
Cambodia’s economic outlook remains positive, but is subject to downside risks.
The IMF Managing Director Christine Lagarde expressed optimism...
More India Bank Frauds Revealed
Over 25,800 fraud cases involving about Rs179 crore ($1.79...
Qatar Calls to Investigate UAE Bank’s Bogus Deals
Qatar has asked US regulators to investigate the US subsidiary...
Free trade achieves more good for the planet.
US President Donald Trump’s steel tariffs have brought the...
Morocco Currency Reform on Right Track
Few weeks after the launch of the gradual dirham float, the...
EU Readies Tax on US Technological Titans
The European Union will next week unveil plans for a digital...
Apparel imports from ASEAN are growing, spurred by low labor costs  in such countries as Vietnam.
Import prices for apparel and daily goods in Japan plunged...