Market roundup | Earnings expectations drop for FY17 and FY18
Analysts downgrade earnings forecasts for Sensex firms for this fiscal year and the next, which may make market valuations look expensive
Earnings expectations for FY17 and FY18 take a dip
Analysts have downgraded their earnings expectations for Sensex companies for fiscal years 2017 and 2018, show estimates compiled by Bloomberg. The markets have tempered expectations for the second half. These numbers may be revised further, depending on how companies fare in the September quarter and what managements say about their future outlook. Note that while the FY18 earnings expectations have also declined, analysts will take a closer look at this number once there is clarity on where FY17 earnings settle at. A moderation in earnings expectations may make market valuations (price-to-earnings ratio) look expensive, unless that corrects suitably.
Hedge fund gains buoyed by tech, healthcare, energy
Hedge fund returns saw a modest increase in September compared to the previous month. However, the third quarter of 2016 has been the strongest in the year so far with a 2.96% increase in the HFRI Fund Weighted Composite Index over a year ago, data from Hedge Fund Research (HFR) showed. This was led by gains in funds focused on sectors such as technology, healthcare and energy. The index rose by 0.6% in September, its seventh consecutive month of positive performance. The HFR index’s performance is pegged to top equity markets in 2016, according to HFR.
Over half of pending rail projects unbankable
Delays in railway construction projects are of concern. Data shows that 61% of the pending construction projects such as laying new lines, doubling and gauge conversion are unbankable, according to data compiled by PhillipCapital (India) Pvt. Ltd. The classification is based on projects pending over the years for which returns are calculable. Inordinate delays in execution, land acquisition problems and escalating costs are said to be the primary reasons. Most of the delays are on projects to lay new lines. The projects became unbankable, i.e. the railways has to fund them, despite the reduction in threshold return expectations to 12% in 2014-15 from 14% earlier. As of August 2016, Indian Railways had 3,871 projects amounting to Rs4.4 trillion pending or under various stages of execution. Of these, 495 projects amounting to Rs3.6 trillion are construction projects, according to the PhillipCapital report.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!