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Indian Markets Face 'Peak Pessimism' but Recovery Signs Emerge, Says BofA's Maheswari
India in “peak pessimism” phase, but cyclical recovery may lift earnings: Arbind Maheswari
Image: The Economic Times
Arbind Maheswari from BofA Securities highlights that India's equity markets are experiencing subdued earnings growth and valuation concerns, yet signs of cyclical recovery could lead to modest returns. With earnings growth estimates revised to 8.5%, Maheswari believes that the current pessimism may pave the way for potential market rebounds.
- 01Earnings growth estimates for India have been cut to 8.5%, indicating a third consecutive year of single-digit growth.
- 02Maheswari notes that current market pessimism may be at its peak, suggesting a potential for 10% index returns by year-end.
- 03Despite muted performance, foreign investors remain engaged, focusing on sectors like energy security and infrastructure.
- 04Valuation concerns persist, but Maheswari believes investors will pay premiums if growth visibility improves.
- 05Capital flows are currently dominated by technology and AI sectors, with potential shifts expected as this trend evolves.
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Indian equity markets are currently in a phase marked by subdued earnings growth and high valuation concerns, according to Arbind Maheswari from BofA Securities. He noted that earnings estimates have been revised down to 8.5%, indicating a potential third consecutive year of single-digit corporate profit growth. Despite this, Maheswari believes that the sentiment in the markets is at a low point, which may allow for modest returns of around 10% by the end of the year. He emphasized that while macro uncertainties remain, the cyclical nature of current challenges is likely temporary. Foreign investors continue to show interest in India, particularly in sectors such as energy security and infrastructure, despite the lackluster performance of the markets. Maheswari also pointed out that capital flows are heavily concentrated in technology, especially AI-related sectors, which could shift as market dynamics change. He remains optimistic that India will attract more investment once the current tech-driven trends evolve.
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The subdued earnings growth and valuation concerns may affect investment decisions and market performance, impacting both local and foreign investors.
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