1. Stock markets soaring, but economy sluggish; know what is in store in future

Stock markets soaring, but economy sluggish; know what is in store in future

Earnings growth, high frequency data don’t quite match optimism in the stock markets

By: | New Delhi | Published: July 17, 2017 6:21 AM
Stock markets, stocks, economy New project announcements in Q1FY18 fell 8% year-on-year, slipping for the second quarter in a row to Rs 1.4 lakh crore. (Reuters)

Even as stock prices climb to new highs, the data on the ground shows the economy is not gaining momentum. At 32,000, the Sensex now trades at 18.5 times the estimated one-year forward earnings. That’s a huge 20% premium to the long-term historical price-earnings multiple that India has traded at.

However, earnings growth and other high frequency indicators don’t quite match the optimism in the stock markets. Analysts expect earnings for the broader universe to fall in the June quarter.

Capex is crawling. New project announcements in Q1FY18 fell 8% year-on-year, slipping for the second quarter in a row to Rs 1.4 lakh crore. This is much lower than the average quarterly investments of the past three years, data from CMIE reveals.

Export growth is slowing. Although exports may have risen in the past ten months, they come off a low base. In June, the pace of exports moderated to just 4.4% y-o-y with non-oil exports slowing for the third consecutive month.

Loan growth remains tepid. While there is an increase in money mopped up via the bond markets, non-food growth is growing at just 6-7% and borrowings via CPs too are slowing.

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    prof subin
    Jul 17, 2017 at 11:06 pm
    Stock market will be turning back from 9950-9980. Economy is slowing down. GST feature is done and people are slightly pessimistic about it. FII s had already exited. Tomorrow I too will be exiting and investing in Bonds. Wow, a good movement to watch
    Reply

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