Even as stock prices climb to new highs, data show that the economy is not gaining momentum on the ground. At 32,000, the Sensex now trades at 18.5 times the estimated one-year forward earnings. That’s a huge 20 per cent premium to the long-term historical price-earnings multiple that India has traded at.
However, earnings growth and other high-frequency indicators don’t quite match the optimism in the stock markets. Analysts expect earnings for the broader universe to fall in the June quarter.
Capex is crawling. New project announcements in Q1FY18 fell 8 per cent year-on-year, slipping for the second quarter in a row to Rs 1.4 lakh crore. This is much lower than the average quarterly investments of the past three years, data from CMIE reveals.
Export growth is slowing. Although exports may have risen in the past ten months, they come off a low base. In June, the pace of exports moderated to just 4.4 per cent y-o-y with non-oil exports slowing for the third consecutive month. Loan growth remains tepid. While there is an increase in money mopped up via the bond markets, non-food growth is growing at just 6-7 per cent and borrowings via CPs, too, are slowing.