Weekly Market Outlook by Hemant Kanawala, Head - Equity - Kotak Life Insurance

"The consensus earnings of Nifty for FY18 and FY19 have been revised downwards by 5.5% and 2% respectively in last 6 months led by short term disruptions caused due to implementation of GST from July 1. In view of this, earnings for the September quarter to be announced over next 1 month holds key to future direction of the market. Going forward, as the GST system stabilizes and earnings base turns more favorable from December quarter, we believe that earnings growth will pick up. The economy remains supported by growth in consumption and exports. Investment activity is likely to pick up with a lag once the capacity utilization in the economy improves. The earnings growth will be led by external dependent sectors like metals and refinery and domestic consumption like retail finance companies, automobiles and consumer durables.

The market is currently trading at P/B of 3.5 in line with its long term average. As earnings growth has been subdued in last few years, we believe that P/B is more appropriate valuation tool than P/E. The market offers an attractive opportunity to build exposure at current levels as well as on declines with 3 to 5 years view".

Source : Equity Bulls

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