“The FY20-21E earnings estimates of the Indian office of GREED & fear’s new home are 5 – 6 per cent lower for the Nifty Index since the start of 2019 with valuations at a one-year forward PE of over 18x, compared with a 10-year average of 16x,” he says.
have been one of the best performing in the global context thus far in calendar year 2019 (CY19), with the S&P BSE Sensex rallying nearly 11 per cent. The mid-and small-cap indices, however, have been laggards. While the S&P BSE Mid-cap index slipped around 2.5 per cent during this period, the S&P BSE Small-cap index has gained a modest 2 per cent, data from ACE Equity shows.
The stock market rally in CY19 has been led by foreign institutional investors (FIIs), who have pumped Rs 74,981 crore thus far into equities on a year-to-date (YTD) basis. They had withdrawn a net Rs 2,263 crore in the corresponding period in 2018. Mutual funds, on the other hand, have mostly been fence-sitters. They have invested Rs 3,858 crore into equities (YTD), as compared to an investment of Rs 59,372 crore in the same period in 2018, data shows.
Wood sees mutual fund flows to equities to resume post the outcome of the general election and expects the reforms initiated by the Modi government in its first term to bear fruits over the next five years. As regards policy and reform measures, he expects the new government to initially focus on agricultural and labour reforms.
“The macro challenge is clearly to generate jobs given the demographics. The plan is to remove the Agriculture Produce Market Committee (APMC) Act. The other area needing attention is labour reform since India has employer unfriendly labour laws which make it hard to retrench workers,” Wood wrote.
Adding: “Long-term observers of India should understand that the re-election of Modi probably marks the final nail in the coffin for the old elite whose vested interests in the corporate sector at least are directly threatened by the bankruptcy legislation. In this respect, the aim is to move India from a patronage system to a rules-based system.”