Strong and robust earnings growth is the foundation of a bull market and Indian markets lack such support, said CNBC-TV18's Udayan Mukherjee. "It is a small miracle that the market has turned in some performance for investors even in the backdrop of such tepid earnings growth," he added.
"This quality bubble, which we have got used to over the last two-three years, is basically indicating that the patience of investors is running thin," said Mukherjee.
He pointed out that only a narrow set of stocks delivered the returns and turning in the performance, but portfolios have not done well in 2019.
"If you map it, from January 1 to year to date, and ask most people around, including marquee professional investors, I don’t think they will be able to tell you that it has been a good year and they have made 12-13 percent as the Sensex might be suggesting," he added.
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What has worked so far
Mukharjee believes FII inflows and positive sentiment in the global markets have boosted local equities. "It has been a good global year, the Dow is up 24-25 percent this year and we have done half of that. The global equity backdrop has been supportive. Flows have turned strong over the last month or so and you have had a fairly significant delta step jump with a corporate tax cut," said Mukharjee.
FPIs had been net buyers for two months to November. They invested Rs 16,037.6 crore in October and Rs 22,871.8 crore in November on a net basis.
"These are the two elements which have delivered the return otherwise domestically in terms of earnings – and all the earnings growth we are talking about this year is thanks to that corporate tax cut otherwise we are in low single-digit once again,” he said.
Mukharjee noted that this is a difficult market to have made money out of and it is an extremely difficult economic backdrop.
"All the return you are seeing right now is thanks to some moves from the government and the global risk on that we are witnessing which has got in a few billion dollars otherwise there is no return,” he said.
Mukharjee said he was horrified to hear Kumar Mangalam Birla's comment that Vodafone Idea will shut operations if the government will not provide relief. "This is nothing short of blackmail," he said.
"The government may have been partially responsible for the situation we are in but I have some sympathy," said Mukharjee.
The government, which cannot pay the states for its share of goods and services tax, does not have enough resources to address everything immediately, he said. "You cannot go on crying to the government for everything."
"First corporate taxes then income taxes then bail out companies from telecom to banking and there is no money, so I am not in this camp which believes that the government has the resources to suddenly miraculously drive this economy up,” he said.