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Economic Times
04-07-2025
- Business
- Economic Times
Expect double-digit earnings growth from BSE 500 companies going ahead: Mukul Kochhar
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads , Head of Institutional Equities,says despite global concerns, the Indian market exhibits underlying strength with expectations of double-digit earnings growth for BSE 500 in FY26 and FY27. Lower structural inflation supports valuations, coupled with responsible fiscal management leading to lower interest rates and high corporate profitability . The key challenge lies in securing trade treaties to integrate into global supply are some concerns, largely external, and I will first just talk about that. What has happened is because the Indian market on a relative basis has done very well, foreign investors have taken an opportunity to book gains. That was the story last year and we expect that story to continue for this year and maybe into the near future. What that has resulted in is that capital flows which used to provide a cushion to the currency of roughly $40 billion per year, turned neutral in to balance that, if capital flows are neutral, you have to have a neutral trade balance. That is just basic economics. In order to have a neutral trade balance, we need to be part of the global supply chains and have some sort of an understanding on trade with the large trade blocks, US, Europe, etc, which are underway and that is why there is so much focus of the market on what is going to happen on the US trade is very critical to get that right and that could be a near-term catalyst for the market. If we look beyond the external, which is the capital flows and the counter balancing trade equations, the market is actually pretty okay. We are expecting double-digit earnings growth for BSE 500 in FY26 and FY27. Remember that inflation structurally in India is down. Inflation is down from higher than 5% or close to 6% in the average of the last 5 to 10 years to now 3%.Despite this lower inflation, our earnings growth has kept up and it is in double digits, in which case valuations are well supported. So we have reasonable earnings growth and the valuations are well supported given lower inflation and lower interest rates. Structurally we are looking pretty good. I can talk about a few more points about this which is responsible fiscal management by the government and which is leading to lower interest rates and high corporate profitability which is positive for upcoming capex. There are multiple positives brewing for the market. The only concern is whether we are able to sign some sort of a reasonable trade treaty to be part of global supply cyclical is a theme we have been on for the last three-four years and that continues. It is now a more savings and investment-led economy. Those themes are largely domestic. In this environment, financials will do well. So, we are selectively positive on the banks. We have some picks in the largecap as well as the midcap space. We even like some PSU banks in this environment. Some NBFCs are attractive including lending and non- lending. On the non-lending side, some capital markets exposed companies, which are savings-related NBFCs, are very are reasonably comfortable with industrial names. The leading industrial companies look attractive right now. We believe that the auto sector has some reasonable picks. On the domestic cyclical side, we do not have trouble finding reasonably priced stocks with decent growth momentum. We have a little bit of a concern when I said the economy is going to be savings and investment led. Domestic consumption is going to suffer there. We are negative on consumer staples. We are also negative on Indian IT services largely because valuations are not supportive. If currency dynamics are not favourable, largecap IT is not going to deliver good are two kinds of capital flows on the equity side that come into the country. One is a foreign direct investment (FDI) which is long-term capital expenditure related flows. Those are actually fairly stable, and we get $75 to $80 billion a year and that continues, that has trended over the last six-seven years and that has short-term flows, which are the FII flows, vary depending on how attractive opportunities are in the market, which literally could turn every few months. In March, the market had become very attractive in terms of valuation and foreign flows were good for the next two-three months. Now, the market is up from those levels. There is 10-15% appreciation and people are taking some profits. That is very normal and nothing to worry the flow side, what has really changed in India in the last one-two years, is where on the capital flows, we need to think about the outgoing FDI investments. Outgoing FDI investment includes people having come in, made capex six-seven years ago, and now selling down and booking profits on those including Indian companies that are flushed with capital today and investing outside, has picked up on a structural basis and we need to think about it a little bit. But FII equity flows come and go and there's nothing to worry about there.
Time of India
13-06-2025
- Business
- Time of India
Expect a lot of wealth creation in equity market over next 5 years: Gautam Duggad
Gautam Duggad , Head Of Research, Director - Institutional Equities, Motilal Oswal Financial Services , projects a 10-11% compound nominal GDP growth. Corporate India's earnings may grow at 14-15% between 2025 and 2027. This growth could continue until 2030. Nifty 500 companies' profits surged from Rs 4 lakh crore in 2020 to Rs 16 lakh crore in 2025. Continued compounding suggests significant wealth creation in the Indian equity market . Recently there was a very interesting note from your team which says that the corporate profit to GDP number is standing tall at a 17-year high. Help us understand what this ratio really implies and also what implications it can have on the Indian equity markets. Gautam Duggad: We just put out a note on corporate profit to GDP which is our annual signature note. Allow me to explain it in a little bit granular fashion. Corporate profit to GDP basically reflects on the underlying earning cycle. In 2020, in the middle of COVID, we had a corporate profit to GDP ratio of 2.1%, which is where it bottomed out. In 2008, at the previous peak of earnings, the corporate profit to GDP was somewhere close to 5.1%. Right now, from 2.1% in 2020, we have already reached 4.7%. This is at a new high post the 2008 peak. This does not include unlisted names. This is just the Nifty 500 companies. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like One of the Most Successful Investors of All Time, Warren Buffett, Recommends: 5 Books for Turning... Blinkist: Warren Buffett's Reading List Click Here If you add up all the listed companies, this ratio is somewhere close to 5.1%. And last year, the corporate profit to GDP performance was trending close to 4.7% and then, if you added the unlisted and listed, it was about 6.7% or 6.8%. The previous peak of corporate profit to GDP, summing up the entire listed and unlisted universe, was 7.9% in 2008. We bottomed out at somewhere around 1.92% in 2020. Right now, just the listed data is available for FY25 within which 4.7% is Nifty 500 companies and the rest of the listed companies put together is 0.4%, so we are at 5.1% in FY25. As the unlisted data comes by September, we will update that. For reference, in FY24, the listed plus unlisted stood at 7.3%. So, I would think that this year that number would have moved closer to 7.5%, but we are still 40-50 basis points below the previous peak. So, the interesting thing to note here is that while we are already in the middle of an earnings up cycle which began in 2020, there are still a couple of years left for this entire up cycle to play out. Given that there is a preponderance of a lot of sectors which were hitherto not listed and they are listed now, so possibility of this ratio in the foreseeable future crossing even 8-8.5% is very much there. The other interesting thing to note from this report is that the underlying nominal GDP as such does not have too much of a bearing basically on the profit or corporate India's earnings performance. If you look at 2003 to 2008 which was the previous big bull cycle on earnings, the underlying nominal GDP compounded at close to 15%, earnings compounded at 30%. Live Events You Might Also Like: Jyotivardhan Jaipuria on where to put money on the table and where to take it off From 2008 to 2020, the 12 years saw an earnings recession where the underlying nominal GDP compounded at somewhere close to 12.5% CAGR but the corporate earnings compounded at a miserly 4%. We were obviously impacted with so many issues in that 10-year period. Now again from 2020 to 2025, the nominal GDP has compounded at 10.5%, but the earnings have compounded at 30%. So, the underlying GDP has broadly trended in that 10%, 12%, 14% band over a 15-17-year period. But corporate earnings have had a massive cycle of 30%, then 4%, and is now back at 30%. A lot of the high beta cyclical sectors have compounded this rise from 2.1% to 4.7% in the five years including metals, oil and gas. The biggest contributor has been financials which is where the earnings up cycle has been massive post 2020. If I look at the contribution of BFSI alone, the BFSI profit to GDP ratio has moved from 0.46% to about 1.84%. So, almost 40% of the incremental increase in corporate profit to GDP ratio has come at the behest of BFSI. Those are the broad points I wanted to highlight from this report. What do you think is aiding corporate profitability? What are the factors at play and where could it head next if these factors continue to hold through from India Inc.? Gautam Duggad: Like I mentioned, during 2020-2025, cyclicals have made a huge contribution. The BFSI profits have crossed close to Rs 6 lakh crore right now. If you look at Nifty also, in FY18, the Nifty profitability in BFSI bottomed out somewhere close to Rs 45,000-48,000 crore. That number has reached Rs 3-3.5 lakh crore. So, that is the level of increase that we have seen. In FY25, if I look at the broader coverage universe, in the 65 financial companies that we track, we had a total profit pool of Rs 50,000 crore in FY18 and somewhere close to Rs 1,10,000, 1,15,000 crore in FY20. That number is now Rs 5 lakh crore. For context, this Rs 5 lakh crore was the total profit pool of all 300 companies that we used to track. You Might Also Like: Short covering anticipated next week; bullish on 4 pharma & defence stocks: CA Rudramurthy BV So, what was the profit pool of the 300 companies has now become the profit pool of just financials. So, they have made a huge contribution. Then, there are global commodities like metals, oil and gas. They have gone through their upcycle between 2020 and 2025. Then, there are a host of other sectors which have come and contributed. The capital goods sector, which was absent from 2012 to 2020, has made a huge comeback and we have seen how the stock prices have done. Going forward, we expect the nominal GDP to compound at 10% to 11%. We expect the earnings performance of corporate India will be in mid-teens. So, somewhere about 14-15% is what we are projecting between 2025 and 2027 and I would not be surprised if that magnitude of growth continues beyond 2027 to 2030 also. So, that is our expectations from a medium-term earnings point of view. We have come a long way from 2020 to 2025. What used to be a profit of just Rs 4 lakh crore for Nifty 500 companies has turned into Rs 16 lakh crore in 2025. Even if this were to compound at 14-15% over the next five years, there is a lot of wealth still to be created in the Indian equity market.
Economic Times
13-06-2025
- Business
- Economic Times
Expect a lot of wealth creation in equity market over next 5 years: Gautam Duggad
Tired of too many ads? Remove Ads Also Read: Jyotivardhan Jaipuria on where to put money on the table and where to take it off Tired of too many ads? Remove Ads , Head Of Research, Director - Institutional Equities,, projects a 10-11% compound nominal GDP growth. Corporate India's earnings may grow at 14-15% between 2025 and 2027. This growth could continue until 2030. Nifty 500 companies' profits surged from Rs 4 lakh crore in 2020 to Rs 16 lakh crore in 2025. Continued compounding suggests significant wealth creation in the Indian equity market We just put out a note on corporate profit to GDP which is our annual signature note. Allow me to explain it in a little bit granular fashion. Corporate profit to GDP basically reflects on the underlying earning cycle. In 2020, in the middle of COVID, we had a corporate profit to GDP ratio of 2.1%, which is where it bottomed out. In 2008, at the previous peak of earnings, the corporate profit to GDP was somewhere close to 5.1%. Right now, from 2.1% in 2020, we have already reached 4.7%. This is at a new high post the 2008 peak. This does not include unlisted names. This is just the Nifty 500 you add up all the listed companies, this ratio is somewhere close to 5.1%. And last year, the corporate profit to GDP performance was trending close to 4.7% and then, if you added the unlisted and listed, it was about 6.7% or 6.8%. The previous peak of corporate profit to GDP, summing up the entire listed and unlisted universe, was 7.9% in 2008. We bottomed out at somewhere around 1.92% in 2020. Right now, just the listed data is available for FY25 within which 4.7% is Nifty 500 companies and the rest of the listed companies put together is 0.4%, so we are at 5.1% in the unlisted data comes by September, we will update that. For reference, in FY24, the listed plus unlisted stood at 7.3%. So, I would think that this year that number would have moved closer to 7.5%, but we are still 40-50 basis points below the previous peak. So, the interesting thing to note here is that while we are already in the middle of an earnings up cycle which began in 2020, there are still a couple of years left for this entire up cycle to play out. Given that there is a preponderance of a lot of sectors which were hitherto not listed and they are listed now, so possibility of this ratio in the foreseeable future crossing even 8-8.5% is very much other interesting thing to note from this report is that the underlying nominal GDP as such does not have too much of a bearing basically on the profit or corporate India's earnings performance. If you look at 2003 to 2008 which was the previous big bull cycle on earnings, the underlying nominal GDP compounded at close to 15%, earnings compounded at 30%.From 2008 to 2020, the 12 years saw an earnings recession where the underlying nominal GDP compounded at somewhere close to 12.5% CAGR but the corporate earnings compounded at a miserly 4%. We were obviously impacted with so many issues in that 10-year period. Now again from 2020 to 2025, the nominal GDP has compounded at 10.5%, but the earnings have compounded at 30%.So, the underlying GDP has broadly trended in that 10%, 12%, 14% band over a 15-17-year period. But corporate earnings have had a massive cycle of 30%, then 4%, and is now back at 30%. A lot of the high beta cyclical sectors have compounded this rise from 2.1% to 4.7% in the five years including metals, oil and gas. The biggest contributor has been financials which is where the earnings up cycle has been massive post 2020. If I look at the contribution of BFSI alone, the BFSI profit to GDP ratio has moved from 0.46% to about 1.84%. So, almost 40% of the incremental increase in corporate profit to GDP ratio has come at the behest of BFSI. Those are the broad points I wanted to highlight from this I mentioned, during 2020-2025, cyclicals have made a huge contribution. The BFSI profits have crossed close to Rs 6 lakh crore right now. If you look at Nifty also, in FY18, the Nifty profitability in BFSI bottomed out somewhere close to Rs 45,000-48,000 crore. That number has reached Rs 3-3.5 lakh crore. So, that is the level of increase that we have FY25, if I look at the broader coverage universe, in the 65 financial companies that we track, we had a total profit pool of Rs 50,000 crore in FY18 and somewhere close to Rs 1,10,000, 1,15,000 crore in FY20. That number is now Rs 5 lakh crore. For context, this Rs 5 lakh crore was the total profit pool of all 300 companies that we used to what was the profit pool of the 300 companies has now become the profit pool of just financials. So, they have made a huge contribution. Then, there are global commodities like metals, oil and gas. They have gone through their upcycle between 2020 and 2025. Then, there are a host of other sectors which have come and capital goods sector, which was absent from 2012 to 2020, has made a huge comeback and we have seen how the stock prices have done. Going forward, we expect the nominal GDP to compound at 10% to 11%. We expect the earnings performance of corporate India will be in mid-teens. So, somewhere about 14-15% is what we are projecting between 2025 and 2027 and I would not be surprised if that magnitude of growth continues beyond 2027 to 2030 that is our expectations from a medium-term earnings point of view. We have come a long way from 2020 to 2025. What used to be a profit of just Rs 4 lakh crore for Nifty 500 companies has turned into Rs 16 lakh crore in 2025. Even if this were to compound at 14-15% over the next five years, there is a lot of wealth still to be created in the Indian equity market.
Time of India
12-06-2025
- Business
- Time of India
Is there a market rotation in favour of IT, pharma and auto? Dhananjay Sinha answers
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel CEO & Co-Head– Institutional Equities,, says the IT sector is showing signs of recovery as US-China relations improve, easing investor concerns about order book uncertainty. Potential US tax cuts could further boost the sector. Significant corrections in IT stocks have created attractive valuations, leading to a possible rotation of investments into IT. Pharma and auto sectors may also benefit from this you look at the market profile, there has been a good rebound, I would say, after the initial correction. If you look at the market capitalisation of NSE, it had actually shrunk by almost like Rs 90 lakh crore to the lows in February or end of February and from there on, the market cap erosion has actually narrowed quite substantially because of the recovery that has happened. We have recovered almost like Rs 70 lakh crore out of the balance is only Rs 20 lakh crore from the peak level that we saw in September last year. So, I would say what has happened is that sectors have taken turns to rebound. We had RBI also infusing liquidity substantially, so that has also played out. What is happening now is the IT sector which is actually gradually coming back and the fact that there was an overhang on the sector with the recession risk being priced into the US economy and it was a spillover effect of the US-China conflict, the engagement that is happening between US and China in thawing the lock jam is something that can be seen as positive for the IT sector because a lot of investors were concerned about the order book uncertainty that it had created.I would say the overhang is actually receding. There is also a possibility that the market might start pricing in tax cuts in the US as well. These are the two things that are moving in favour of the IT sector. IT stocks have seen significant correction and there is a certain amount of valuation that people might be looking at. All put together, there does seem to be this whole rotation across sectors moving in favour of IT now. So, IT is one sector. There are other sectors like pharma where there is a possibility of rotation in favour of them. Auto is another one, news will have an effect on the alco-beverage companies. What the Maharashtra government has announced may create a certain amount of suspicion that other states might actually also announce. This could be because state governments are also struggling on the revenue side. There is a likelihood that people might expect or extrapolate this kind of a scenario in other states as well.I would say people will need to wait to see whether they get more clarity on this and whether this can create a trend. While we are positive fundamentally on space, we do have Allied Blenders in our list, but this is a regulatory risk that will need to settle down before we take a decisive view.
Economic Times
12-06-2025
- Business
- Economic Times
Is there a market rotation in favour of IT, pharma and auto? Dhananjay Sinha answers
Tired of too many ads? Remove Ads CEO & Co-Head– Institutional Equities,, says the IT sector is showing signs of recovery as US-China relations improve, easing investor concerns about order book uncertainty. Potential US tax cuts could further boost the sector. Significant corrections in IT stocks have created attractive valuations, leading to a possible rotation of investments into IT. Pharma and auto sectors may also benefit from this you look at the market profile, there has been a good rebound, I would say, after the initial correction. If you look at the market capitalisation of NSE, it had actually shrunk by almost like Rs 90 lakh crore to the lows in February or end of February and from there on, the market cap erosion has actually narrowed quite substantially because of the recovery that has happened. We have recovered almost like Rs 70 lakh crore out of the balance is only Rs 20 lakh crore from the peak level that we saw in September last year. So, I would say what has happened is that sectors have taken turns to rebound. We had RBI also infusing liquidity substantially, so that has also played out. What is happening now is the IT sector which is actually gradually coming back and the fact that there was an overhang on the sector with the recession risk being priced into the US economy and it was a spillover effect of the US-China conflict, the engagement that is happening between US and China in thawing the lock jam is something that can be seen as positive for the IT sector because a lot of investors were concerned about the order book uncertainty that it had created.I would say the overhang is actually receding. There is also a possibility that the market might start pricing in tax cuts in the US as well. These are the two things that are moving in favour of the IT sector. IT stocks have seen significant correction and there is a certain amount of valuation that people might be looking at. All put together, there does seem to be this whole rotation across sectors moving in favour of IT now. So, IT is one sector. There are other sectors like pharma where there is a possibility of rotation in favour of them. Auto is another one, news will have an effect on the alco-beverage companies. What the Maharashtra government has announced may create a certain amount of suspicion that other states might actually also announce. This could be because state governments are also struggling on the revenue side. There is a likelihood that people might expect or extrapolate this kind of a scenario in other states as well.I would say people will need to wait to see whether they get more clarity on this and whether this can create a trend. While we are positive fundamentally on space, we do have Allied Blenders in our list, but this is a regulatory risk that will need to settle down before we take a decisive view.
