In the second quarter, the much awaited government reforms finally came through. The government opened FDI in multi-brand retail and aviation, hiked price of diesel, reduced withholding tax on foreign borrowings and also suggested a debt recast for the state power utilities. Markets responded positively to the reforms moves by the government. Continued liquidity support by the Foreign Institutional Investors (FIIs), who have invest about 7b USD so far, also aided the positive momentum.
Now the Nifty is around 19,200 and post this rise (~10% gain for the Nifty in 2QFY13), valuations are at about 15x FY13 earnings, which is the average of the long term PE band for the benchmarks. Further sustainable rise in the markets will be led only by further initiatives on the core reforms. These core reforms are necessary to encourage more investments and help sustain the earnings and valuations at current levels.
Expectations from the results are not very high, which may act as a cushion for the markets. If the markets have to sustain the current levels and move up, it will need to have more confidence in the medium-to-long
term growth rates of Corporate India. Also, the above-mentioned concerns have to be effectively and immediately addressed. The room for disappointment is very limited and disappointment in earnings or on future outlook may result in corresponding specific corrections.
Now the Nifty is around 19,200 and post this rise (~10% gain for the Nifty in 2QFY13), valuations are at about 15x FY13 earnings, which is the average of the long term PE band for the benchmarks. Further sustainable rise in the markets will be led only by further initiatives on the core reforms. These core reforms are necessary to encourage more investments and help sustain the earnings and valuations at current levels.
Expectations from the results are not very high, which may act as a cushion for the markets. If the markets have to sustain the current levels and move up, it will need to have more confidence in the medium-to-long
term growth rates of Corporate India. Also, the above-mentioned concerns have to be effectively and immediately addressed. The room for disappointment is very limited and disappointment in earnings or on future outlook may result in corresponding specific corrections.
