Market

Edelweiss says Street's expectation of 9-month Nifty EPS growth remains high at 23%

Updated : August 22, 2019 01:08 PM IST

Weak Q1 numbers led to 8 percent cut in FY20 Nifty EPS estimates led by banks, auto and metals, said recent report by Edelweiss.

Despite, the earnings cut, the Street building steep acceleration in earnings from 2 percent growth in Q1FY20 to 23 percent for M9FY20.

Edelweiss says Street's expectation of 9-month Nifty EPS growth remains high at 23%

The first-quarter earnings of this fiscal year remained bleak and moderate on the back of low domestic consumption, global macro factors, low foreign investment and weakness in the economy. In fact, weak Q1 numbers led to 8 percent cut in FY20 Nifty EPS estimates led by banks, auto and metals, said a recent report by Edelweiss.

The research house added, “High valuations amidst high earnings downgrade risks keep us cautious on the market. We have a defensive stance in our model portfolio with FMCG, private banks and telecom being our key overweights.”

Speaking on Nifty earnings, Edelweiss believes that 18 percent Nifty EPS growth forecast for FY20 is optimistic and prone to downgrade given the weak global growth and subdued domestic economic momentum.

Nifty forecast

Edelweiss further said, “The Street is building 23 percent growth for the next nine months. This appears to be steep. While base effects are favourable, the current macro environment, domestic as well as global, remains challenging.”

Despite, the earnings cut, the Street building steep acceleration in earnings from 2 percent growth in Q1FY20 to 23 percent for M9FY20, makes Nifty prone to earnings downgrade, the report added.

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