The Samvat year gone by has been one of the toughest for Indian equity investors in over a decade. The BSE Sensex slumped 8% and the Nifty 50 shed 7% in Samvat 2082, putting them on course for their worst Samvat-year performance since Samvat 2067, when both headline indices declined over 17%.
The underperformance of Indian equities in Samvat 2082 is a reflection of the difference between economic growth and stock market performance, said Ankur Punj, managing director of Equirus Wealth.
“A strong economy does not necessarily translate into strong equity returns, particularly when valuations are elevated and earnings growth does not meet market expectations,” Punj said.
Weakness in the Indian market was due to global capital being allocated to artificial intelligence-led sectors, which we lacked, and this, coupled with geopolitical uncertainty and high crude oil prices, led to persistent foreign institutional investor selling, putting huge pressure on the rupee, he explained.
While earnings prospects have improved after three difficult years, annual earnings-per-share (EPS) growth of 10-11% over the next decade seems realistic, according to Saurabh Mukherjea, founder and chief investment officer of Marcellus Investment Managers. He said the Nifty’s current price-to-earnings (P/E) ratio of about 18 could revert to its long-term average of 15.