Weekly Market Outlook by Hemant Kanawala, Head - Equity, Kotak Life Insurance

"The market continues to trade strongly on the backdrop of strong domestic flows whereas FII are taking a cautious view due to downgrade in earnings. Although the results for the quarter ended June 2017 were expected to be weak, the actuals were below the revised estimates and hence led to downgrade in earnings for FY18. Monsoon on pan India basis is also tracking below long term average but the distribution seems to be reasonable. Final crop output and demand in festival season will be an important variable to track trajectory of economic activity. GDP growth for the June quarter suggests that consumption is the only bright spot in the economy while private investments remains an area of concern.

One key event to watch in next few weeks is the amount raised by the companies through primary and secondary offerings. Based on the funds already raised in August and indicative pipeline for the month of September, equity supply of $5 bn is expected, which can absorb large part of liquidity available with the domestic institutions. However, the bright side of this fund raising is that it leads to listing of many new businesses, which were not previously available to investors. This can hence attract entirely new set of investors. The markets may look optically expensive on P/E basis as earnings have been depressed for last few quarters but on P/B basis, the markets are trading in line with long term averages and hence offers reasonable opportunity to long term investors."

Source : Equity Bulls

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