Business Today 13-Jun-21

Stock markets have continued to defy gravity despite 18 months of relentless onslaught of Covid. The Sensex, for instance, currently rules at 32x the price-earnings multiple — 25 per cent higher than 25.5x PE multiple of the world’s best known index, the Dow Jones Industrial Average. The Sensex is also the most expensive in Asia, almost twice as expensive as the Shanghai Stock Exchange. In India, as much as in many other parts of the world, markets have shown that they are looking beyond Covid for better times ahead. They expect an uptick in sales across sectors as economies get back to life, and due to superior corporate earnings arising out of enormous belttightening, better debt management and expenditure management. That’s as far as hope goes—just what the stock markets…

RETAIL INFLATION IS SHARPLY DOWN SINCE FY13… Retail Inflation (%) …CORE INFLATION ALSO SHOWS A STEADY DIP Core Inflation (%) SHARPER DIP IN RURAL INFLATION (Y-o-Y growth %) URBAN RURAL FOOD INFLATION CONTINUES TO BE HIGH FY12-FY21 CAGR (%) General Index 5.82 Pan, tobacco and intoxicants 7.93 Food & beverages 6.1 Housing 5.93 Clothing & footwear 5.9 Fuel & light 5.09 Miscellaneous 5.31 MANIPUR AND TAMIL NADU HAD THE HIGHEST INFLATION RATES FY12-FY21 CAGR (%)…

↘ After factoring in recent developments and new restrictions, the economic cost of the latest shutdowns is $1.25 billion per week, down from around $3.5 billion in the 2020 (strict partial) lockdown, according to a Barclays India estimate ↘ In a full lockdown scenario, losses will rise to $5.3 billion per week (in bearish case). ↘ The costs of the lockdown reflect the widening geographical spread of the second wave, which will have an impact on growth through end June, says the report LOCKDOWN COSTS PER WEEK ($billion)…

There is an old saying that when a pigeon sees a cat, it closes its eyes, and assumes that it is safe. Indian equity markets are being just that pigeon, ignoring risks and overlooking facts. Despite reality staring in the face, investors refuse to pay heed to econom ic and financial risks due to the disruption from the second wave of coronavirus. Defying the rising death count, case load and slow pace of vaccination, the benchmark BSE Sensex reclaimed mount 50K even as daily official deaths hit an all-time high of 4,329 on May 18 and state after state announced lockdowns to slow the spread of the virus. With this, Sensex is up 5.1 per cent since the beginning of the calendar year, trading at a price to earnings (P/E)…

HIGH VALUATIONS Sensex P/E multiple is among the highest in the world. BSE Small-cap index is at 62 times trailing earnings per share INPUT COSTS Commodity prices have risen sharply over past few months. This will hit financials of a large chunk of companies, especially those in the manufacturing business EARNINGS Analysts have lowered earnings forecasts as majority of non-essential services and manufacturing activities have come to a halt in most parts of the country GDP DIP Global agencies have lowered GDP growth forecasts due to Covid-19 second wave. This means performance of India Inc. will also be impacted INFLATION In April, wholesale price index-based inflation surged to 10.49 per cent. This increases the risk of rise in interest rates…

Earnings Per Share Have Been Dipping in Most Recent Periods… BSE Sensex Trailing Earnings Per Share (₹) …But P/E Multiples Remain Way Above Average BSE Sensex Trailing P/E Multiples Sensex Among Most Expensive Indices P/E Ratio (trailing 12 months) S&P BSE Sensex, India 31.2 Jakarta Composite Index, Indonesia 29.6 S&P 500, USA 29.2 Dow Jones Indus. Avg, USA 25.5 Kospi Index, South Korea 20.3 Nikkei 225, Japan 19.7 FTSE Bursa Malaysia KlCI, Malaysia 19.2 Taiwan Taiex Index, Taiwan 17.1 Shanghai SE Composite, China 15.9 IBovespa Index, Brazil 14.9 Hang Seng, Hong Kong 13.6 Wholesale Inflation Spike Will Raise Input Costs of Companies Trend in wholesale price Index (all commodities, in %) A Number of Agencies Have Lowered GDP Growth Forecasts (For FY22)…