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India’s earnings growth story best after Korea: CLSA

Updated : January 22, 2021 02:18 PM IST

“The whole excitement around India is based on the fact that India has the best earnings growth story in the world other than South Korea, if I were to take 3-year period,” said Vikash Kumar Jain, Investment Analyst at CLSA, on Friday.

The four most dangerous words in any bull market are “this time it’s different” and with the Sensex at 50,000, those words have started doing the rounds.

“There are many arguments that I have heard which sound like this time might be different, which are actually very dangerous words in the market,” Jain said in an interview to CNBC-TV18.

He said that few players were ready to accept the argument that valuations have become expensive.

Jain said the whole excitement around India was based on the fact that India’s earnings growth story is among the best, next to South Korea, from a three-year perspective.

CLSA has created proprietary index where it has short-listed 20 odd indicators which gives a sense of investor sentiment.

“Historically, there have been periods like this, for example there was a period around 2003-04 where for other reasons we rallied significantly. So yes, maybe this time is different. I hope it is, but if it is not the problem with the indicator is like – sentiment is like a pendulum and and since it has gone so much to the extreme, my worry is that when it tries to come back it might go down to other extreme – that’s what my worry is,” Jain said.

“The red flag is that this index is at 15-year high. We back tested the history of this index in predicting tops and bottoms isn’t bad, it’s reasonably good and from that perspective given that it’s at 15-year high we are at a point where you have never seen before valuations both on trailing as well as forward PE, never seen before investor sentiment, at least not in 15 years,” Jain said.

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