Latest news with #SanjeevPrasad
Bloomberg
18 hours ago
- Business
- Bloomberg
India's Lofty Equity Valuations Are Pure Bollywood
Even to seasoned investment professionals, India's lofty equity valuations are a head-scratcher. How's a sell-side researcher to explain to a foreign institution that the country's cement makers are more than twice as expensive as their peers in every other major market? Building materials are just one example, though that's what analyst Sanjeev Prasad and his team at Kotak Institutional Equities picked to raise some provocative questions in a recent investor note, titled What the cement sector tells us about our industry.
Economic Times
2 days ago
- Business
- Economic Times
Positive macro already priced in, market needs fresh earnings trigger: Sanjeev Prasad
So, at this point in time, we still have to wait for the good macro to transmit into micro. We have a lot of positive stuff going on over there. "Just to give you some more data over here, for the Nifty 50 Index for example we are looking at about 12% growth as far as earnings is concerned for FY2026, but almost 60% of the incremental profits for FY2026 is coming from either the commodity sectors or sectors which are very specific facts, for example tariff increase," says Sanjeev Prasad, Kotak Institutional Equities. What is your market view right now based on where we stand in terms of the risk and the reward ratio? Sanjeev Prasad: Market view pretty much remains the same here. We are stuck looks like in a narrow band which has been the case for a while now. If you look at the last one-year performance, the market has not done really much. It has been in that 24 plus-minus band for a while now. So, on the one side you have valuations which are pretty expensive and on the other side you have a decent macro, clearly things are looking better over there, hopefully that translates into earnings growth and better earning growth, but let us wait on that because you still have a lot of challenge with respect to domestic growth, we have a lot of issues on global front which we still do not know fully as to exactly how they pan out. So, yes, so that is where we are. You have I guess equal mix of positive on the one side and very high valuation which will probably make the market stay range bound for some more time. The macros have turned favourable and do you think that could lead to further earning surprise given that liquidity is back, interest rates are headed lower, crude is down, inflation is down. Are we in for positive earning surprise because of good macros? Sanjeev Prasad: This is the whole challenge with the construct of the market actually. There is a big disconnect between what is good for the economy need not necessarily be good for the market. If you look at the earnings composition of the market, a lot of earnings actually come from commodity sectors, a lot of earnings come from exporters and at this point in time you clearly have a lot of challenges on the earning numbers of exporters for sure, that is, IT services, parts of pharma, some of the auto companies and also because of lower commodity prices which is good for the economy in general, it is not good for the earning numbers. Just to give you some more data over here, for the Nifty 50 Index for example we are looking at about 12% growth as far as earnings is concerned for FY2026, but almost 60% of the incremental profits for FY2026 is coming from either the commodity sectors or sectors which are very specific facts, for example tariff increase. So, if you have any risk associated with any of the global factors, that is lower commodity prices and so on and so forth, a decent portion of the earning numbers on incremental basis could get cut. For example, in our numbers about 20 odd percent or 22% to be precise of the incremental profits of the Nifty 50 has actually come from the metal and mining sector, that has got nothing to do with economy to be honest with you, it is more to do with the fact that we have safeguard duties on steel, we should improve the profitability of the steel companies and higher aluminium prices. Same way 16% incremental profit is coming from ONGC which again got nothing to do with the economy, it is coming because of higher gas prices. There are some risks with lower crude prices over there. Same way between Reliance and Bharti, about 17-18% of the incremental profits of Nifty is actually coming from these two companies tariff increases, again very-very sector and company specific factors. So, at this point in time, we still have to wait for the good macro to transmit into micro. We have a lot of positive stuff going on over there. Your note says, the first line says that the Indian market seems to be stuck. Help us understand that what can actually get Indian markets out of this particular zone because on the macro front, like even you have been highlighting a couple of these things are changing, the inflation coming down, we are in the rate cycle and from the earnings as well though the earnings were not that great, but not big disappointment indeed. Sanjeev Prasad: A lot of good news to be honest with you because a lot of the good news is already priced in, whatever we are talking about macro is a very well-known fact, whether with respect to rate cuts, the market has more or less assumed another three to four rate cuts of 25 basis point each, so that is known; lower inflation; is known; lower commodity prices, at least oil does help a lot, so all that is known. The question is whether we see any earnings upgrades on the back of a decent macro and that is where the challenge is coming. The immediate impact of this so-called improvement macro is actually a negative impact for large section of the market. Interest rate cut means it is actually negative for parts of the banking sector and depending on how much interest rates get cut, it could be negative to negative especially for some of the private banks or private bank in general who have a very large portion of their loan book linked to external benchmark rate. Same way if you look at lower crude prices, fantastic for the economy as a whole and just to give you the math, every dollar per barrel is about 1.7-1.8 billion dollar saving for the economy, so that is a lot compared to last year average price of more like 79, but obviously the negative for something like ONGC. So that is the whole issue over here, this good macro we all know, fine, it is a given and which is in a way supporting the market, but ultimately we are not seeing any great movement on the earnings part and if you look at earnings have been getting cut only for the last, if I look at from let us say the end of third quarter result season and the fourth quarter result season, we have seen about three odd percent earnings cut and so far it does not look like we are seeing any earnings upgrades for sure.
Time of India
2 days ago
- Business
- Time of India
Positive macro already priced in, market needs fresh earnings trigger: Sanjeev Prasad
"Just to give you some more data over here, for the Nifty 50 Index for example we are looking at about 12% growth as far as earnings is concerned for FY2026, but almost 60% of the incremental profits for FY2026 is coming from either the commodity sectors or sectors which are very specific facts, for example tariff increase," says Sanjeev Prasad , Kotak Institutional Equities. What is your market view right now based on where we stand in terms of the risk and the reward ratio? Sanjeev Prasad: Market view pretty much remains the same here. We are stuck looks like in a narrow band which has been the case for a while now. If you look at the last one-year performance, the market has not done really much. It has been in that 24 plus-minus band for a while now. So, on the one side you have valuations which are pretty expensive and on the other side you have a decent macro, clearly things are looking better over there, hopefully that translates into earnings growth and better earning growth, but let us wait on that because you still have a lot of challenge with respect to domestic growth, we have a lot of issues on global front which we still do not know fully as to exactly how they pan out. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Formigamento nos pés? Teste esse novo aparelho que vem ajudando pessoas aartedoherbalismo Undo So, yes, so that is where we are. You have I guess equal mix of positive on the one side and very high valuation which will probably make the market stay range bound for some more time. The macros have turned favourable and do you think that could lead to further earning surprise given that liquidity is back, interest rates are headed lower, crude is down, inflation is down. Are we in for positive earning surprise because of good macros? Sanjeev Prasad: This is the whole challenge with the construct of the market actually. There is a big disconnect between what is good for the economy need not necessarily be good for the market. If you look at the earnings composition of the market, a lot of earnings actually come from commodity sectors, a lot of earnings come from exporters and at this point in time you clearly have a lot of challenges on the earning numbers of exporters for sure, that is, IT services, parts of pharma, some of the auto companies and also because of lower commodity prices which is good for the economy in general, it is not good for the earning numbers. Live Events Just to give you some more data over here, for the Nifty 50 Index for example we are looking at about 12% growth as far as earnings is concerned for FY2026, but almost 60% of the incremental profits for FY2026 is coming from either the commodity sectors or sectors which are very specific facts, for example tariff increase. So, if you have any risk associated with any of the global factors, that is lower commodity prices and so on and so forth, a decent portion of the earning numbers on incremental basis could get cut. For example, in our numbers about 20 odd percent or 22% to be precise of the incremental profits of the Nifty 50 has actually come from the metal and mining sector, that has got nothing to do with economy to be honest with you, it is more to do with the fact that we have safeguard duties on steel, we should improve the profitability of the steel companies and higher aluminium prices. Same way 16% incremental profit is coming from ONGC which again got nothing to do with the economy, it is coming because of higher gas prices. There are some risks with lower crude prices over there. Same way between Reliance and Bharti, about 17-18% of the incremental profits of Nifty is actually coming from these two companies tariff increases, again very-very sector and company specific factors. So, at this point in time, we still have to wait for the good macro to transmit into micro. We have a lot of positive stuff going on over there. Your note says, the first line says that the Indian market seems to be stuck. Help us understand that what can actually get Indian markets out of this particular zone because on the macro front, like even you have been highlighting a couple of these things are changing, the inflation coming down, we are in the rate cycle and from the earnings as well though the earnings were not that great, but not big disappointment indeed. Sanjeev Prasad: A lot of good news to be honest with you because a lot of the good news is already priced in, whatever we are talking about macro is a very well-known fact, whether with respect to rate cuts, the market has more or less assumed another three to four rate cuts of 25 basis point each, so that is known; lower inflation; is known; lower commodity prices, at least oil does help a lot, so all that is known. The question is whether we see any earnings upgrades on the back of a decent macro and that is where the challenge is coming. The immediate impact of this so-called improvement macro is actually a negative impact for large section of the market. Interest rate cut means it is actually negative for parts of the banking sector and depending on how much interest rates get cut, it could be negative to negative especially for some of the private banks or private bank in general who have a very large portion of their loan book linked to external benchmark rate. Same way if you look at lower crude prices, fantastic for the economy as a whole and just to give you the math, every dollar per barrel is about 1.7-1.8 billion dollar saving for the economy, so that is a lot compared to last year average price of more like 79, but obviously the negative for something like ONGC. So that is the whole issue over here, this good macro we all know, fine, it is a given and which is in a way supporting the market, but ultimately we are not seeing any great movement on the earnings part and if you look at earnings have been getting cut only for the last, if I look at from let us say the end of third quarter result season and the fourth quarter result season, we have seen about three odd percent earnings cut and so far it does not look like we are seeing any earnings upgrades for sure.
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Business Standard
3 days ago
- Business
- Business Standard
Markets stuck between rich valuation, tepid growth; SMIDs at risk: Report
Stock Market Outlook: The valuations of the Indian market and of most sectors and stocks are quite rich and well above fair values, cautioned Sanjeev Prasad of Kotak Institutional Equities Nikita Vashisht New Delhi Market outlook: The consolidation in the Indian stock markets may continue for the next few months as rich valuations, weak domestic consumption and investment, along with global uncertainty cap any meaningful upside, believe analysts at Kotak Institutional Equities. In a report titled 'Indian Markets: All dressed up and nowhere to go'', Sanjeev Prasad of Kotak IE pointed out that the stock market (primarily the benchmark indices) is ignoring risks from a sluggish domestic outlook and a challenged global macroenvironment underscored by a likely low growth and possibly high inflation. "In this context, the valuations of the Indian market and of most sectors and stocks are quite rich and well above fair values. This suggests that investors, both institutional and retail, are yet to reconcile with the new reality," Prasad said in a co-authored report with Anindya Bhowmik and Sunita Baldawa. On the bourses, the stock markets were highly volatile in trade today, swinging between gains and losses. The BSE Sensex index tumbled 1,199 points from the day's high to hit a low of 80,575 level in the intraday trade. The NSE Nifty50, on the other hand, crashed 343 points from the day's high to hit a low of 24,502. The market has been moving sideways since May 12, 2025. Stock market outlook: Key risks According to analysts at Kotak Institutional Equities, there is a disconnect between the valuations of the Indian stock markets and the fundamentals of the domestic and global economic growth. On the domestic front, Prasad anticipates a slowdown in the Indian economy on the back of lower growth in investment, which would overshadow any potential recovery in consumption. "While there could be a gradual recovery in the domestic consumption demand, any major upside to demand recovery is ruled out due to muted growth in income of low-income and middle-income households and a possible slowdown in consumption demand of high-income households," it said. Additionally, the brokerage projects moderation in central government capex, coupled with a modest pickup in state capex, despite a significant increase in state budgets for FY2026, likely slowdown in residential real estate demand, and no meaningful pickup in private capex, to curtail demand growth. Globally, Kotak analysts said the flip-flop policies of the US administration on the tariff issue have created a great deal of uncertainties with respect to global growth and inflation. While the markets, global and Indian, have already priced in the best-case scenario of the US and its major trade partners concluding trade agreements before the July 9 deadline, leading to moderate import tariffs and subsequent uptick in inflation, the reality is that only one trade deal (with the UK) has been signed for far. "In a realistic scenario of dragged-out trade negotiations, the market could be volatile based on news (good, bad or ugly) but struggle to break out of a certain range," it said. Stock market valuations In this backdrop, the brokerage believes valuations of the Indian stock market have stayed at high levels in several sectors and stocks despite meaningful earnings downgrades. This, it said, highlights a scenario where either the market does not care about valuations and/or the market does not care about earnings. "In our view, this nonchalant attitude perhaps reflects the market's confidence in retail investors sustaining their hitherto price-agnostic purchase of stocks through mutual funds, and FPIs staying positive on Indian equities based on a 'narrative' of a lack of alternatives in emerging markets," it said. Data, however, points out that retail investors have been reducing new investments into mutual funds. FPIs, on the other hand, are "value-sensitive" investors. As the Indian market has not performed in the recent global rally, investors should acknowledge that "Indian exceptionalism" may not be enough. Largecap vs mid, smallcaps: Where to invest? Kotak Institutional Equities believes the large-cap indices may find some support from continued optimism among investors about India's long-term growth prospects and lower interest rates, but the small and mid-cap stocks (SMID stocks) have a long way to correct to their fair values. According to the brokerage most large-cap and mid-cap consumption stocks (FMCG and durables), capital goods and EMS stocks, and outsourcing stocks (information technology) are trading at expensive valuations.
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.
