A lot of market experts are saying that the markets are not overvalued, and earnings growth will be better in the upcoming quarters. In an interview to CNBC TV18, Sandeep Bhatia of Macquarie Securities said, “Clearly the earnings growth trajectory is the moot question which everyone talks about in interaction with fund managers. We will see the activity levels pick up in this quarter and earnings growth will also come through by the fourth quarter.”
But does he expect a correction in the near term? “In think in the near term we can have a correction. I would expect a 5% correction,” Sandeep Bhatia Head – India Equities, Macquarie Capital Securities told the channel. Sandeep Bhatia maintains that India is ‘buy on dips’ market, and said that anything above 10% correction presents an excellent buying opportunity. “Anything above 10% is an excellent buying opportunity. The market goes through its stages, so now we seem to be climbing a mountain of worries metaphorically, and therefore, the markets will take a breather,” he said adding, “I don’t think anything structurally has been impaired in the economy.”
Another market expert Prashant Jain of HDFC Mutual Fund says that we may see a turnaround in earnings.“The profitability in many sectors is passing through a very challenging phase. In next two years we should see the concerns getting addressed, that earnings are not growing. I think we are going to enter a phase of very healthy earnings,” Prashant Jain, CIO HDFC Mutual Fund said in an interview to ET Now..
Amid fear of overvaluation in the markets, Ridham Desai explained that currently equities appear to be cheaper than bonds, as bonds are trading with a high P/E ratio. “Bonds are trading at 16 times earnings. The bond cash flow, the coupon that you get, will terminate after 10 years. The dividends you get go way beyond the 10 year time-frame. This implies that equities are actually much cheaper, and that’s because bond yields are very low compared to India’s own history,” he said adding that if the yields fall further, equity will become even more attractive,” Ridham Desai said in his Morningstar conference address yesterday.