Gautam Duggad , Head Of Research, Director – Institutional Equities, Motilal Oswal , says if in the next three-four months, Nifty does not go anywhere and consolidates in this range, it will provide some cushion for valuation to move up in the next 24 months. However, Nifty has been very subdued. Coming to trailing three-year returns – October ‘24 or November ‘24 versus November ‘21, Nifty has given 11% three-year compounding, whereas mid and smallcap has given 21% and 23% compounding on a three-year basis. From here, room for valuation expansion is extremely limited and it will be a function of how much earnings growth you are able to derive from any index.
The earning season has been subpar. What is your key takeaway of the earning season and going forward which are the sectors that you think are poised for further upgrades or earning surprise if at all?
Gautam Duggad: Yes, the earning season has been very soft and after a very long time we have seen downgrades being much higher than upgrades. So, if you look at it in absolute terms, so far this quarter for the coverage universe which has posted numbers upwards of 225 companies. So far, the earnings are down 4% versus expectations of a 1.5% decline. Of course, it is heavily influenced by the drag from commodities.
If you exclude just the three OMC companies, the earnings are up 6% versus expectation of around 5%, so broadly in line. And if you go a step further and exclude all metals and oil and gas, which is basically all commodity companies, then for about 205 companies that we track out of the 226 that I mentioned at the beginning, if you exclude those 21 commodity companies, earnings are up close to 10% which is
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