Even as India Inc gears up for the new fiscal year, analysts’ outlook for the FY20 results of Sensex and Nifty appears to be robust. According to global firm Morgan Stanley, factors leading to a tepid earning have now reversed, and the stage is set for a reversal. “We observe that most of these factors have reversed for FY20, setting the stage for a new earnings cycle. This cycle could last for four to five years with market earnings compounding at 20 per cent per annum,” Ridham Desai, managing director at Morgan Stanley India said in a note. Notably, the brokerage expects earnings growth of 24% for Sensex companies in FY20. The firm has a target of 42,000 on the Sensex by December 2019.
According to Motilal Oswal, excluding corporate banks, FY20 Nifty profits are expected to post 14% growth. “We expect Nifty sales, EBITDA and PAT to increase by 11%, 2% and 15% on a base of 16%, 22% and 8% growth, respectively. Ex-Corporate Banks, Nifty profits are expected to decline 2.7% YoY. Our Nifty EPS estimates for FY19/20 have been cut by 2.1%/3.6% to INR486/INR606 (prior: INR496/INR629), building in EPS growth of 6.8%/24.8% for the Nifty for FY19/20,” Motilal Oswal said in its report.
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Sharing its outlook for the upcoming results season, Motilal Oswal said that the 4QFY19 earnings-report season will be a repeat of 3QFY19, with financials driving the performance singlehandedly. “Global Cyclicals – the driver of earnings growth over the last few quarters – have decelerated sharply,” said the report.
Motilal Oswal’s top largecap picks include ICICI Bank, SBI, Maruti, Titan, Coal India, Bharti Airtel, L&T, Infosys and ACC. In the midcap segment, the firm’s prefferred picks are Federal Bank, Shriram Transport, Godrej Agrovet, Indian Hotels, Marico, IGL, Exide, Jindal Steel and Alkem Labs.
While the overall outlook is favourable, Morgan Stanley has warned about risks related to politics, global factors, and policy choices. Since India has limited domestic production of oil, terms of trade are heavily dependent on the price of oil, noted the report.
According to Motilal Oswal, once the dust settles on politics in 1QFY20, the market’s focus is expected to revert to fundamentals. “Narratives like earnings revival led by banking, global growth and central bank policies, rural consumption trends given the predictions of below normal monsoons, and the inter-play of crude and currency will dominate the discourse, in our view,” said the research firm in its report.
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