Even as Nifty trades at near all-time high levels leading market participants to question if the market rally is backed by fundamentals, Taher Badshah of Invesco Mutual Fund says that the earnings in the July-September quarter has been better than the last four quarters. In an interview to ET Now, Taher Badshah CIO (Equities), Invesco Mutual Fund said, “ One should dissect the earnings to see how many companies are actually over-delivering, or beating street estimates versus earlier. An analysis of the 35 companies of Nifty which have delivered results so far, 75% of them have actually beaten street estimates, or at least met them. This number was closer to 55% in the last four or five quarters. This is a better way to track earnings delivery versus expectation, and I believe on that front, things seem to be getting better.”
Last week, Manish Sonthalia of Motilal Oswal too concurred that the companies so far have reported better than expected earnings. In an interview to CNBC TV18, Manish Sonthalia, Head of Equities at Motilal Oswal said, “The earnings is not that bad, as was expected prior to the earnings season. Particularly the GST related sectors etc, I don’t think the numbers which have come out so far are that disastrous.”
In an interview to BTVi, Harsha Upadhyaya, Head – Equity investments for Kotak Mutual Fund, said that strong earnings will be necessary to sustain the rally. However, Taher Badshah of Invesco Mutual Fund said that the valuations may hold, given the overall macro-picture. “If looked in the context of the fact that numbers are improving, then valuations at some level will probably hold given that many of the other macro variables are reasonably in place,” Taher Badshah said in the same interview.
Last week, Nilesh Shah of Kotak AMC had pointed out that while the indices maybe trading at all-time high levels, the valuations haven’t peaked. “Indices are at all-time high, valuations are not at all-time high. We can’t compare the bull market valuation of 1991, 2000 and 2008. In 2008, profit as a percentage of GDP was 7.1%, in 2017, it is 3%. When I compare valuations, in 2008, it was peak profitability cycle valuation. Today, we have a depressed profitability valuation. There’s no guarantee that 3% GDP will move towards 7% valuation, but certainly it will move towards 5% level,” Nilesh Shah, Managing Director of Kotak AMC said in an interview to CNBC TV18.