Over the month, consensus earnings estimates for the broad market (MSCI India) were reduced by a marginal 0.5% and 0.1% for FY10 and FY11 respectively. The street now estimates earnings growth of 6% for FY10 and 27% for FY11.
Valuations and inflation are negatively correlated. The correlation is the strongest with the Financials, Energy, and Consumer Discretionary sectors. Utilities, Health Care, and Staples are sectors with the weakest relationship.
J.P. Morgan economists expect inflation to peak at about 12% in June-July: We remain underweight on state-owned banks, real estate, and consumer discretionary. We expect to review our stance at the end of 2Q CY10 when inflation could reach our cyclical peak target and initial estimates on the monsoon are made available.
