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Prepare for a long term PE de-rating?Harsha Upadhyaya, Anand Shah, Gopal Agrawal,

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Key Take-Aways
  • Rise in US and local interest rates and contraction of QE can cause some level of PE de-rating globally and in India

  • Indian equity market can be cushioned by domestic inflows - retail SIPs, EPFO and NPS, especially since FII inflows were not the biggest driver. Indian debt markets story may however be a little different

  • Earnings growth can counter PE de-rating in the next 3 years - so even if PEs reduce, there will still be money to be made on earnings growth momentum

  • MNC stocks in India could see PE de-rating as their cheap global interest cost fueled buy backs will now halt, causing their outperformance to vanish

  • Higher global cost of funds will put a brake on capital induced disruptions across sectors, thereby giving strong incumbents much required breathing space - which is a big positive for markets

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