Do it yourself

The GDP data for 3QFY21 and second advance estimates for FY21, released by CSO last Friday has evoked mixed response from economists. While the positive growth number (0.4%) for 3QFY21 has been received with a sigh of relief (as it ends the technical recession), the downgrade of full year FY21 estimates from -7.5% to -8%, implies a negative growth print for 4QFY21. Presently, growth estimates for 4QFY21 range between -0.8% to -1.5%. The slowing momentum in 4QFY21 has also resulted in changes in FY22 growth estimates; which now mostly range between 10-11%. This implies a normalized growth of about 1% CAGR over FY21-FY22. I have highlighted this issue earlier also. For common man nominal GDP is more important because lot of variables like effective taxation, budgetary allocations for development and social welfare, subsidies, salaries of public servants, etc. are calculated as a factor of the nominal GDP. Lower nominal GDP essentially means lower income for people and lower tax revenue f...

The latest earnings season has started on a very buoyant note, led by some IT companies. In line with the high speed macro indicators, most brokerages have upgraded their earnings estimates in past one month. The present estimates are building in a very strong earnings recovery over FY22-FY23. The estimates for the current year FY21 have also been upgraded sharply from a contraction of 5% to 12% to a growth of 5% to 12%. Currently, the market is estimating an earnings growth of 24% to 38% in FY22 and another 18% to 22% growth in FY23. It is important to note that these estimates assume GDP growth of -7% to -7.5% in FY21; 9% to10% in FY22 and 4 to 5.5% in FY23; interest rate bottoming in FY21 and elevated inflation of 5 to 6% over FY22 and FY23. This implies less than 3% CAGR of GDP over three year period of FY20-FY23. Whereas, the present estimates imply ~19% CAGR in Nifty EPS over FY20-FY23. Apparently, there is disconnect between the macro forecast and earnings forecast. In past ...