Investors Need to Stay Put to Make the Most of Rally
Stock prices likely to appreciate on the back of earnings growth, say analysts
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.