If one believes in India's long-term growth story, it may just be time to take the plunge as many of the blue chips such as Maruti Suzuki Tata Powerand Dr Reddy's trade at a valuation lower than the post Lehman Brothers trough in March 2009.
The global selloff in equities that wiped out more than $3 trillion in wealth has been indiscriminate with even companies having more than 30% earnings growth bearing the brunt despite their fundamentals turning stronger. Rising cost of funds and input prices may slow revenue growth and squeeze their profitability, but a possible slide in commodity prices may turn out to be a blessing in disguise.
Even if macro fundamentals deteriorate, efficient companies could outperform. "The common perception is that earnings growth is highly levered to the economic growth," said a recent note from Morgan Stanley. "Operating leverage has been falling and is at an 8-year low. The sensitivity of earnings to macro growth is likely to be lower than history." "Earnings seem relatively better protected compared to a growth slowdown in 2008-09."
The global selloff in equities that wiped out more than $3 trillion in wealth has been indiscriminate with even companies having more than 30% earnings growth bearing the brunt despite their fundamentals turning stronger. Rising cost of funds and input prices may slow revenue growth and squeeze their profitability, but a possible slide in commodity prices may turn out to be a blessing in disguise.
Even if macro fundamentals deteriorate, efficient companies could outperform. "The common perception is that earnings growth is highly levered to the economic growth," said a recent note from Morgan Stanley. "Operating leverage has been falling and is at an 8-year low. The sensitivity of earnings to macro growth is likely to be lower than history." "Earnings seem relatively better protected compared to a growth slowdown in 2008-09."
AKANKSHA ARORA
PGDM -3 sem
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