In­vestors Need to Stay Put to Make the Most of Rally

Stock prices likely to ap­pre­ci­ate on the back of earn­ings growth, say an­a­lysts

The Economic Times - - Companies -

RA­JESH N NAIDU & ASHUTOSH R SHYAM

ern­ment at the Cen­tre is likely to stim­u­late growth and dif­fuse fears about a pol­icy paral­y­sis. The re­tail in­vestor can now hope to see stocks ap­pre­ci­ate on the back of earn­ing growth.” the per­son said, re­quest­ing that he not be quoted. Fund man­agers are now rec­om­mend­ing cycli­cal themes such as state-owned banks, in­fra­struc­ture, and en­ergy. The ex­tent of upside on cycli­cal or re­formed-re­lated stocks is re­flected in the val­u­a­tions of the BSE Cap­i­tal Goods and BSE Oil & Gas in­dices. The BSE Oil & Gas in­dex in the last ten years traded in the range of 8-26 times price to earn­ings and is now trad­ing at 12 times price to earn­ings mul­ti­ple. This means that there is fur­ther scope for ex­pan­sion in val­u­a­tion which would be driven by earn­ings. Sim­i­larly, the BSE Cap­i­tal Goods in­dex is now trad­ing at 28 times price to earn­ings mul­ti­ple, which in the last ten years has been trad­ing 12-38 times.

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