Does the microfinance cycle have more legs? Ishmohit Arora answers
«So, broadly, the last three to six months, the entire rally in last one year is actually led by earnings growth. It is not just price growth,» says Ishmohit Arora, School of Intrinsic Compounding.
Before we talk about market, give me a pulse of how is the sentiment on street among investors, young investors, HNI investors? Is it getting frothier in terms of behavioural finance? Are there so much excitement on street or is there caution even among them?
The interesting thing is everyone is a bit sceptical about the returns that they have seen in the last three to six months and when you speak to a lot of other investors, then everyone is a bit sceptical. Even we are also a bit sceptical but the interesting thing is, whenever we think that we are a bit sceptical, we always end up finding some new interesting opportunities.
So, broadly, the last three to six months, the entire rally in last one year is actually led by earnings growth.
It is not just price growth. So, when we look at PE ratio, it is like price and earnings, but majority of the rally has been led by earnings. Some of the sectors, some of the businesses have grown their earnings at 40% to 50% and that makes it very-very interesting in the entire structure of the markets.
So, speaking to other investors, still there is a bit of scepticism that the entire thing is going to collapse and this is how the bull markets are born. Bull markets are born on the basis of scepticism at the end of the day.
Let us also talk about the midcap and small cap end of the market. Today, we had a big FII, calling it slightly frothy. I was looking at the data. Too much flows seem to be getting concentrated in small cap and midcap. Two big funds have stopped lump sum, Tata and Nippon
