Why Credit Suisse expects Drop in India's P/E premium likely due to Consensus Downgrade ?
The broader Indian market has continued to underperform global markets, though mildly MTD in Jan (up 9% since 8-Nov. FPI outflows have been small but when seen with inflows in AxJ, this stands out this explains how most investors don't seem to have "acted" but India has underperformed meaningfully.
Rather than indicate an inflection, we believe a lower P/E implies that the market anticipates EPS cuts: CS bottom-up estimates for Nifty EPS are 2%/4% below consensus for FY17/FY18, with estimates below consensus for nearly every sector, and particularly so for Energy, Pharmaceuticals and PSU Banks.
On the whole we believe the narrower indices like Nifty/BSE100 may not do that badly, but some sectors may underperform: Discretionary, cement, NBFCs.
