Latest news with #BhavikJoshi
Mint
29-05-2025
- Business
- Mint
Returns trump valuations: Are these stocks screaming a buy?
In a market wary of stretched valuations, a cohort of Indian stocks have delivered over 30% returns despite falling P/E ratios — a rare show of strength grounded in earnings alone. A Mint analysis of 3,700 BSE-listed companies finds that 212 stocks have delivered over 30% returns in the past year even as their price-to-earnings (P/E) ratios declined. This rare divergence suggests a shift in investor focus — from re-rating-driven gains to core earnings performance. The list spans four large-cap and nine mid-cap stocks, but is dominated by small caps. Their outperformance is largely anchored in fundamentals, with 72% reporting healthy core earnings and strong growth in earnings per share (EPS), excluding exceptional items. The P/E ratio, one of the most closely tracked metrics in equity markets, measures how much investors are willing to pay for each rupee of earnings. A rising P/E typically reflects optimism about a company's growth prospects and can amplify share-price gains. Conversely, a declining P/E — or de-rating — is often seen as a sign of caution, driven by macro concerns or uncertainty around earnings visibility. Read this | What's behind steep stock market valuations? Kotak's Sanjeev Prasad has a surprise answer While the ideal scenario sees rising earnings fuel both share price and P/E growth, these 212 stocks offer a different narrative. Their earnings have surged, even as valuations have compressed. 'The fall in P/E ratios signals caution. But this divergence reflects a nuanced market dynamic where returns are primarily driven by robust core performance rather than investor-driven re-rating," says Bhavik Joshi, research analyst at Invasset PMS. 'This trend reflects a shift in market behaviour." Also read Aegis Vopak tanks up for growth with ₹2,800 crore IPO—but is the price too high? De-rating typically signals scepticism, Joshi explained. It can be due to global headwinds, sector-specific concerns, or muted earnings expectations. But when paired with sharp EPS growth, it can also indicate market mispricing rather than fundamental weakness. So what's holding back re-ratings? "Short-term global uncertainties and a wait-and-watch approach toward earnings consistency have contributed to the market's reluctance to re-rate companies," said Ranju Rajan, head of managed accounts at Axis Securities. 'However, the Indian economic structure continues to strengthen on several fronts." For these select stocks, fundamentals clearly took charge. Take telecom giant Bharti Airtel, the standout large-cap performer in this group. Its P/E dropped sharply from 139x to 56x, yet the stock gained 35% over the year. The real driver? A tripling in EPS (excluding one-offs or exceptional gains), from ₹11 in FY24 to ₹35 in FY25. The company's EPS is projected to rise further to ₹69.23 by FY27, even as the P/E is expected to fall to 26.86x, as per Bloomberg estimates. Among mid-caps, GE Vernova T&D India has posted a return of 69%, with P/E falling from 186x to 94x. A sharp improvement in execution helped push EPS to ₹24 in FY25, up from ₹7 the previous year. EPS is projected to reach ₹42 by FY27, with valuations expected to continue easing. Hitachi Energy India saw its stock rally 76% while its P/E declined from 270x to 213x, supported by EPS nearly doubling to ₹90. Further, Laurus Labs climbed 37% with EPS growing to ₹7, while its P/E fell to 87x from 108x. Both firms are expected to continue delivering double-digit EPS growth over the next two years. Fortis Healthcare, which saw its EPS rise to ₹2 in FY25 from ₹1 in FY24, delivered a 53% stock return. Bloomberg estimates point to robust earnings growth ahead, with EPS projected at ₹13.7 in FY26 and ₹17.8 in FY27 — potentially bringing down its projected P/E to 52x and 40x, respectively. 'Despite strong earnings and solid returns, companies like Bharti Airtel and GE Vernova have seen valuation multiples compress, reflecting a market shift toward core performance over re-rating," said Joshi. 'This trend highlights the need to focus on fundamentals and earnings as key drivers of value." Also read Powering auto giants: Can Belrise's IPO charge up your portfolio? For now, macro trends and earnings performance remain key to market direction. 'In the current environment, large caps and select mid/small caps with strong balance sheets are well-positioned to outperform. In the near term, macroeconomic indicators and earnings will continue to guide market direction. As cyclical and structural drivers align, re-rating opportunities will emerge, though this will be a gradual recovery which will be sailed through by investor patience to identify turnaround stories," said Rajan.
Time of India
23-04-2025
- Business
- Time of India
FIIs hit sell button on TCS, Infosys and 5 other IT stocks. Is this peak pessimism?
Live Events What's spooking FIIs out of IT stocks? Valuations, too, are less reassuring than they appear. Have IT stocks bottomed out? (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel India's IT sector is in the midst of a sharp selloff, with foreign institutional investors (FIIs) offloading marquee names like TCS and Infosys. The Nifty IT index has plunged 26% from its peak. TCS, Infosys HCL Tech , and even midcap players like Persistent and Mphasis witnessed FII exits in the March quarter, raising pressing questions: is this peak pessimism or the beginning of a deeper correction?FII stake in Infosys declined to 32.89% in Q4, down from 33.3% in Q3. TCS saw a steeper drop, with FII ownership falling from 12.68% to 12.04%. HCL Tech also saw a reduction—from 19.38% to 19.15%. Other large- and mid-cap IT names like LTIMindtree , Persistent, and Mphasis reported similar FII selling, suggesting the retreat is broad-based and Wipro stood out as an exception—FII stake rose from 7.81% to 8.35%, despite the stock still trading 28% below its peak. The broader Nifty IT index's 26% correction has spared neither industry titans nor emerging domestic story, however, is more nuanced. Mutual funds increased their stakes across most IT names, including TCS, Infosys, Tech Mahindra, and Persistent. The only notable exits were from LTIMindtree and sell-off extended into the first half of April, with FIIs pulling out another Rs 13,828 crore from Indian IT stocks "FIIs appear to be rotating into high-conviction, emerging themes—such as capital goods, pharma CDMO/CMO, and financials—where India's growth story is visibly accelerating," said Bhavik Joshi, Research Analyst at Invasset PMS, in a conversation with ET pointed to the weakening US dollar as a critical factor. With a significant share of Indian IT companies ' revenue coming from BFSI clients in North America, a softer dollar hurts rupee realizations and compresses margins. Add to that a stressed global BFSI sector, delayed budgets, slower deal conversions, and pricing pressure on legacy services—and it's clear why investors are jittery.'The large-cap IT space is no longer the defensive play it used to be,' Joshi said. 'Growth visibility is cloudy, and that's evident in the muted management commentary across Q4 earnings.'India's top IT firms—TCS, Infosys, and Wipro—posted underwhelming March quarter and FY25 results, reflecting caution amid global uncertainties and weak trade sentiment. TCS reported a 1.7% decline in Q4 net profit to Rs 12,224 crore, while Infosys saw an 11.7% drop to Rs 7,033 crore. TCS expects FY26 to be better, though it flagged challenges like delays in discretionary spending and project ramp-downs. Infosys projected 0–3% revenue growth for FY26—its weakest guidance in a decade outside the pandemic. Wipro forecasted up to a 3.5% sequential revenue decline for Q1FY26, citing client caution, though it remains committed to stable and profitable expectations have also been revised downward. Analysts have cut FY26 sector earnings by 6–8%, while FY27 estimates remain in the 6–8% growth range—but only after an absolute downward revision.'Most top-tier IT names now trade at a cash flow yield of 5–6%, with forward multiples ranging from 17x for Wipro to 22x for TCS,' said Nirav Sheth, CEO of Institutional Equities at Emkay Global. 'While these levels may seem attractive, they are anchored in growth expectations. Medium-term dollar revenue growth has reverted to pre-pandemic norms of 6–8%, with rupee revenue and free cash flow growth trailing slightly.''There has been a decent correction, and valuations are now closer to five-year averages. So some bottom formation may be underway,' said Pawan Bharaddia, Co-founder of Equitree Capital. 'However, given the weak growth outlook, a significant rally is unlikely. We expect consolidation around current levels unless there's clear visibility on growth.'Krishnan VR, Chief of the Quantitative Research team at Marcellus, noted that concerns about reduced discretionary client spending—driven by tariff-related inflation and potential U.S. growth impact—are already partly priced in.'If the U.S. avoids a tariff-induced slowdown in the second half of the year, there could be a case for a recovery in IT stocks,' he Indian IT delivers on growth visibility, margin stability, and deal momentum, FIIs may continue to stay on the sidelines.
