According to a report released by Kotak Equity REsearch, Market Valuations are Full and here is the gist of the report,
We find valuations of the Indian market full with the Nifty-50 trading at 18X FY2017E ‘EPS’ and 15X FY2018E ‘EPS’. A 15-17X multiple on FY2018E ‘EPS’ will lead to a Nifty-50 fair value of 8,200-9,300. We find parts of the market (cement, consumer staples, industrials and media) very expensive even on FY2018E EPS. We project FY2017 and FY2018 net profits of the Nifty- 50 Index to grow at 16.8% and 20.5%, certainly not conservative or for that matter.
On the domestic front, we see consumption-led economic recovery in FY2017 due to (1) likely good monsoons and (2) 7CPC-related payouts. However, FY2018’s growth will depend on private investment, which still looks challenged.
The Street has not exactly distinguished itself on earnings estimates in the past two years. Also, India’s macroeconomic parameters barring growth are unlikely to improve further.
