Yesterday we analyzed earnings trend for constituent companies of the S&P CNX Nifty. On year-on-year basis (Q3 2015 to Q3 2016) earnings showed a growth of 5.0%. In comparison, average stock prices went down by 7.5% during the same period*.

* Based on stock prices as on 1st January for each year.

Current PE Valuation of the Nifty = 19.46

Excel Calculation sheet here – 33 Nifty Company Result

Key Points about Nifty Results for Q3:

  1. The analysis is based on the results of 33 out of 36 Nifty companies which have declared results so far.
  2. The analysis is a broad indication of earnings trends. We have excluded 3 companies from this analysis – Vedanta Limited,Cairn India and Tata Steel due to uneven numbers on account of change in accounting policies /exceptional items.
  3. Earnings are improving while stock prices are showing a declining trend.
  4. On year-on-year basis there is an average growth of 5.0% in profitability. The benchmark Nifty  went down 7.50 % in the same period.
  5. We expect the markets to rise by 10-20% over the next 6-9 month period.
  6. Valuation-wise markets are not expensive; trading at PE multiple of 19.4 on trailing basis, a discount of 18% from the PE multiple of 23.6 from the peak of last year. This is on account of correction in stock prices and not because of any substantial improvement in earnings.
  7. The broad analysis shows mixed bag of earnings from most sectors other than financial services which witnessed major decline in profitability.
  8. Fundamentally (besides valuations) things are looking good at macro level.