|»5 Minute Wrap Up by Equitymaster|
On This Day - 21 NOVEMBER 2019
Sensex Just Hit an All-Time High but the Best is Yet to Come
The growth in earnings i.e. profits, is the key to a rising stock market. When you buy a stock, you are buying the company's stream of earnings in the future.
If the earnings don't grow, or if the market's perception of earnings doesn't change, a stock won't rise.
But if earnings - or market expectations for earnings - do change, stocks move. This is as true for the market as it is for individual companies.
And lately, you've probably heard a lot of worries about slowing earnings growth. Everyone's wondering if the bull market could stall due to this.
If you follow the recent economic numbers, you might be worried too.
But today, I'll show you why the most widely accepted numbers about earnings - the ones Dalal Street analysts and money managers track so closely - are completely wrong.
More importantly, when you use the right metrics, you'll see immediately, what the earnings really say about the stock market.
Earnings growth should move closely in line with stock prices but in recent years, that's not what's been happening.
Take a look at the chart below. It shows the earnings' movement over the past two decades.
While it has had some ups and downs, you can see the overall trend is unmistakably up.
The BSE Sensex recently recorded its biggest two-day gain in the last 10 years.
Post that, we saw a short cooling off period. A sideways movement in the market. This was due to questionable downgrades of India's rating by rating agencies.
There is a fear that poor earnings growth could be a drag on Indian stocks and this could halt the rally.
The initial euphoria of the corporate tax rate cut boosting earnings has waned. Most investors these days think the Sensex hitting a new all-time high, is the sign of a big bubble in Indian stocks.
What they do not realise is that the big cleanup in the Indian economy is changing things in ways no one expected.
And when all this is done, we will see the results. We saw the BSE Sensex hit an all-time high yesterday but I strongly believe, the best is yet to come.
Here are a few reasons why...
These and many more such trends form the basis of Rebirth of India.
With these trends acting as a strong base, I have picked 7 stocks for my subscribers, which will be big beneficiaries when these trends play out.
I strongly believe India's future will be much better than her past.
PS: On Tuesday, 26 November, India's #1 trader will reveal his super profitable personal trading blueprint. Click here to register FREE for Vijay Bhambwani's Weekly Cash Summit.
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement
Disclosure & Disclaimer: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. The Author does not hold any shares in the company/ies discussed in this document. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services.
This document is confidential and is supplied to you for information purposes only. It should not (directly or indirectly) be reproduced, further distributed to any person or published, in whole or in part, for any purpose whatsoever, without the consent of Equitymaster.
This document is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity, who is a citizen or resident or located in any locality, state, country or other jurisdiction, where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject Equitymaster or its affiliates to any registration or licensing requirement within such jurisdiction. If this document is sent or has reached any individual in such country, especially, USA, Canada or the European Union countries, the same may be ignored.
This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Our research recommendations are general in nature and available electronically to all kind of subscribers irrespective of subscribers' investment objectives and financial situation/risk profile. Before acting on any recommendation in this document, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the securities referred to in this material and the income from them may go down as well as up, and subscribers may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Information herein is believed to be reliable but Equitymaster and its affiliates do not warrant its completeness or accuracy. The views/opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. This document should not be construed as an offer to sell or solicitation of an offer to buy any security or asset in any jurisdiction. Equitymaster and its affiliates, its directors, analyst and employees will not be responsible for any loss or liability incurred to any person as a consequence of his or any other person on his behalf taking any decisions based on this document.
As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
Equitymaster Agora Research Private Limited (Research Analyst) 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407