Indian equities may be gripped by pessimism after two difficult years, but Pankaj Tibrewal, founder and chief investment officer of Ikigai Asset Managers, believes the market’s fundamentals are quietly improving. Speaking at the News18 Rising Bharat Summit, Tibrewal said corporate India has begun delivering the earnings growth that was missing during the previous market rally.
“Mood, pessimism, flow: all are important parts of the market, but the most fundamental part of the market is growth, and growth is coming back," says Pankaj Tibrewal. “From a valuation perspective, two years back, the ground reality was quite bad, but stock prices were going up, so markets were divorced from reality then,” he added.
Tibrewal pointed to early results from India’s top 500 companies to argue that the earnings cycle has turned. In what he described as the most challenging quarter, corporate India delivered more than 20% growth in profit after tax.
“Now, till yesterday, 165 companies have reported out of the top 500 companies in India. The revenue growth is a four-year high at 22%, and the PAT growth is 25%,” he said.
For Tibrewal, the contrast with two years ago is stark. Then, investors were paying high multiples for businesses with limited track records while earnings growth remained weak. Now, he argued, earnings are improving even as prices and sentiment remain subdued.