INTRESTING READ - GROWTH DECLINING ?
This is a piece from Business Standard.
Growth in Profit this quarter is the slowest in the last 3 Years for Early bird 200+ companies.
This either can be an anomaly or we need to show good numbers in subsequent quarters.
PE Expansion has happened, Price has run up a lot Now Earnings has to catch up.
This has got nothing to do with the short term. But this surely can determine what can happen in the next 12-18 months.
If growth remains declining, stock prices will start appearing expensive which will lead to lower demand in the market.
Very important 2,3 quarters ahead.
The current fair value of Nifty is close to 17K.
From last March till date, everything has got softer. Sales, wages, spends, hiring. Instead we have seen job cuts. Nothing explains the optimism that Nifty is implying. It's only that we are getting China's share of Emerging market investments because of their extended slowdown. And our cheap Oil deal with Russia. Nothing else seems positive.
@majboormajdoor Markets are forward looking brother. They will rarely trade cheap or at a fair value. Also the market likes stability. The way the Modi government just swept all the 4 state elections 2 months ago, the market started pricing in that 2024 General Election is done and dusted , hence we say this crazy move. If price and P/E expansion is not met with Earnings it will correct.
I am speaking in forward looking perspective too. Incomes and wages are leading indicators of future corporate earnings. If the world is in a slowdown with job losses, there is a downward pressure.
The PE multiplier is a combination of expected growth and discount rate. With interest rates so high, that multiplier should not be as high.
Scary scenario up ahead for stock markets and the economy as well
We have started this year with a lot of positivity and optimism. Things don't work like that in the stock market. I don't know when but we will be getting a 10-15% cut on the index level this year. Maybe after the election, maybe.