D-St bulls have little to chew on: Earnings growth revival looks tough




The FY18 earnings growth estimate is now lower than the previous fiscal’s actual growth. Don’t hold your breath. After the recently concluded June quarter, the fiscal-year earnings per share growth estimate for companies in BSE 100 has been pared by 4 percentage points to 11%, according to Credit Suisse estimates collated from IBES (a unit of Thomson Reuters).

The extent of downgrade was sharper than the 1-2 percentage point reduction in the preceding two quarters. Also uncertain is the FY19 growth estimate of 23%, according to IBES, which is too optimistic, according to some analysts. The FY18 earnings growth estimate is now lower than the previous fiscal’s actual growth. For a sample of 1,318 companies, profit rose 16% in FY17 compared with a 3% drop in previous year.

In addition, the forecast of 12%blended earnings growth of India Inc for the four quarters starting July 1 is among the lowest in emerging markets, better than only Russia and South Africa, according to data compiled by MSCI.On the positive side, the appreciating rupee has improved dollar-denominated earnings growth to 16% year-to-date, attracting marquee investors such as Mark Mobius. The strength of projected earnings growth is pivotal since stock valuations are soaring based on the assumption of future recovery.




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