‘Index earnings yield is unattractive compared to bond yields’

livemint.com:

NEW DELHI : There has not been any meaningful change in Kotak Institutional Equities’ earnings growth outlook for FY24-25 following the June quarter results. Its chief executive officer and co-head Pratik Gupta said the market will continue to consolidate around the current levels for the next few months and there is no major catalyst for a sharp rally or a sustained correction. He believes India’s valuations are not cheap, and index earnings yield is also relatively unattractive versus bond yields.

Edited excerpts What are some of the key takeaways from the June quarter results? The net profit of Nifty companies was up 30% year-on-year (y-o-y) and operating profits were up 14% y-o-y. However, this growth is overstated as this was due to high non-operating incomes, and due to one-off profits at the oil marketing companies. We saw continued demand weakness in autos, fast-moving consumer goods (FMCG), chemicals and information technology (IT) services.

However, we saw good results from capital goods and cement companies. In general, profit margins improved y-o-y as well as sequentially due to stable-to-higher product prices and stable-to-lower raw material prices. Has the result season been able to provide impetus to forward earnings prospects and market outlook? While there were sector- or stock-specific earnings upgrades and downgrades, in general, there has not been any meaningful change in our earnings growth outlook for FY24-25 which remains at 15% CAGR.