We have not seen meaningful growth in Sensex EPS for six quarters. This quarter is no different. It is not the global slowdown which is holding back Sensex EPS growth; if anything, by crunching commodity prices, the global slowdown is helping Sensex EPS show a little bit of growth. What is hitting EPS growth in India is Prime Minister (Narendra) Modi’s resets around black money, crony capitalism and Aadhar. Modi is changing the way consumption and capex takes place in India and corporate India is finding it hard to come to terms with these changes.-said Saurabh Mukherjea
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2 replies on “Modi is hitting EPS growth”
It sounds as if the entire economy is chiefly driven by black money and corruption. If that’s actually true, this is scary situation.
I find this a big stretch in logic. Let me explain. IIRC about 50 – 60% of Sensex earnings are exports – from IT / Pharma / Bajaj Auto in 2W / Tata Steel / Tata Motors, the above actions on black money, Aadhar etc have nothing to do with it.
Pvt banks in the Sensex are seeing slower growth due to slower disbursements and possibly slower ever greening of crony loans – so corporate credit arm slowdown may be linked to actions related to the above. SBI is the only PSB and crackdown may have impacted its corporate business. Again limited.
Consumer goods (HUL) is slowing down because of (in my view) the pass through of fall in commodity prices to the consumers to maintain share esp in face of falling rural demand. The slowing rural demand could be due to lack of MNREGA which would prevent leakages; but also due to a substantial monsoon deficit. ITC is slowing on a/c of impact of a large excise.
Commodity players in the Sensex are hit because of lower global prices given China’s slowdown; and Vedanta took a BIG hit last year – a one off.
Domestic 2Ws are slow because of slow rural demand with same reasons as above. In 4W Maruti is going great, Tata Motors is slowing on a/c of China slowing JLR, M&M on a/c of lack of participation in the growing segment of passenger vehicles, viz., compact SUVs and also tractor slowdown due to poor monsoon.
HDFC may be slowing on a/c slowing real estate which maybe on a/c of TDS etc which could be related to black money.
I do not know much about L&T, Airtel, BHEL, NTPC but cannot imagine how they will get affected by such actions substantially.
So all-in-all making the logical leap from missing Sensex EPS to Modi’s actions is, well, difficult to understand.