The Hindu : Corporate earnings growth to drive equity market: survey

Online edition of India's National Newspaper
Tuesday, Oct 28, 2003

Business

Business

Corporate earnings growth to drive equity market: survey

MUMBAI OCT. 27. The corporate earnings expressed in growing profits, instead of re-rating of markets, would drive the activity on bourses and auto stocks would attract the maximum investors' interest, according to the DSP-Merrill Lynch Fund Managers survey.

The corporate profitability was expected to continue to grow at over 20 per cent in 2003-04, much higher than the Merrill Lynch's estimate of 15 per cent for 2003-04, DSP-ML said in its survey released here today.

This was the first time that the fund managers do not expect re-rating of the markets to be a big driver of equity markets, DSP-ML said.

Despite the bull-run in stocks seen till date, the market was still perceived as undervalued. Close to 70 per cent of the fund managers believe that the markets are undervalued by 10-15 per cent, it said.

Automobile was the most preferred sector for investment among the fund managers while the fast moving consumer goods' stocks were the least preferred, DSP-ML added.

Commercial vehicle companies were expected to post 69 per cent year-on-year growth in earnings, it said adding, leading FMCG companies were expected to face stiff competition and continued pressure on their margins going forward.

On the current market sentiment, the survey said, "In spite of the sharp rally in the equity markets, the overall sentiment continued to be robust.''

DSP-ML said three-fourths of the fund managers expect a double-digit return from the markets and overwhelmingly said they would be buyers if equity prices fell 10 per cent.

Banking was the only other sector where the fund managers held a clear positive outlook and continued to be bullish on commodities such as cement and petrochemicals, it said.

Information technology was the second least preferred sector. The improvement in near term business prospects was balanced by long-term margin concerns and rich valuations.

The pharma sector was appeared to be fairly valued with slow down in earnings momentum and lack of major product approvals, the survey added.

PTI

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