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Key Debate: Is Sensex earnings growth at risk due to GDP growth downgrades?
Unlikely in our view, as global earnings account for almost half the Sensex earnings
In F2011, the share of global earnings for the Sensex companies is at the highest level (of 45%) in history and likely to remain at those levels through F2012. This is almost double the share of exports in GDP. A detailed analysis of the quarterly earnings suggest that the global earnings of Sensex companies in the first three quarters of F2011 grew by 48% YoY while domestic earnings grew by 8% YoY during the period.
What about cyclicality of Sensex earnings?
The rising share of global earnings is not making Sensex earnings more cyclical as most market participants may tend to believe – it remains at an historical average of 30%. It is noteworthy that the bulk of the cyclical portion of Sensex earnings is global in nature indicating leverage to global GDP growth.
Global Earnings up 48%, Domestic Earnings up 8%
•
The quarterly earnings data suggest that the BSE Sensex earnings grew by about 23% YoY thus far in F2011.
•
The detailed analysis of this data suggests that the global earnings of the Sensex companies in F2011 grew by 48% YoY while the domestic earnings for the index companies grew by 8% YoY during the period.
Global Earnings almost Half the Sensex Earnings
Even as the share of exports (goods and services) in GDP has remained unaltered over the past five years, the share of global earnings among Sensex companies has risen by c10ppt during the same period.
•
In fact, in F2011, the share of global earnings for the Sensex companies is at the highest level (of 45%) in history and likely to remain at those levels through F2012. This is almost double the share of exports in GDP.
•
To that extent, global and domestic growth are both likely to have similar impact on the earnings progression in F2012
Cyclical Earnings Share with history
•
The rising share of global earnings is not making Sensex earnings more cyclical as most market participants may tend to believe.
•
Historically, non-cyclical earnings have accounted for 30% of the total Sensex earnings. The average reading (from F2007 to F2012) doesn’t seem to suggest anything starkly different.
High Cyclicality – Good for Now
•
Interestingly, the share of the cyclical portion in global earnings of Sensex is rising.
•
This, in our view, is earnings accretive as our global macro team is forecasting 4.3% growth in 2011. The downside risk is beyond 2012.
•
It is noteworthy that bulk of the cyclical portion of Sensex earnings is global in nature
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Debate: Is Sensex earnings growth at risk due to GDP growth downgrades?
Unlikely in our view, as global earnings account for almost half the Sensex earnings
In F2011, the share of global earnings for the Sensex companies is at the highest level (of 45%) in history and likely to remain at those levels through F2012. This is almost double the share of exports in GDP. A detailed analysis of the quarterly earnings suggest that the global earnings of Sensex companies in the first three quarters of F2011 grew by 48% YoY while domestic earnings grew by 8% YoY during the period.
What about cyclicality of Sensex earnings?
The rising share of global earnings is not making Sensex earnings more cyclical as most market participants may tend to believe – it remains at an historical average of 30%. It is noteworthy that the bulk of the cyclical portion of Sensex earnings is global in nature indicating leverage to global GDP growth.
Global Earnings up 48%, Domestic Earnings up 8%
•
The quarterly earnings data suggest that the BSE Sensex earnings grew by about 23% YoY thus far in F2011.
•
The detailed analysis of this data suggests that the global earnings of the Sensex companies in F2011 grew by 48% YoY while the domestic earnings for the index companies grew by 8% YoY during the period.
Global Earnings almost Half the Sensex Earnings
Even as the share of exports (goods and services) in GDP has remained unaltered over the past five years, the share of global earnings among Sensex companies has risen by c10ppt during the same period.
•
In fact, in F2011, the share of global earnings for the Sensex companies is at the highest level (of 45%) in history and likely to remain at those levels through F2012. This is almost double the share of exports in GDP.
•
To that extent, global and domestic growth are both likely to have similar impact on the earnings progression in F2012
Cyclical Earnings Share with history
•
The rising share of global earnings is not making Sensex earnings more cyclical as most market participants may tend to believe.
•
Historically, non-cyclical earnings have accounted for 30% of the total Sensex earnings. The average reading (from F2007 to F2012) doesn’t seem to suggest anything starkly different.
High Cyclicality – Good for Now
•
Interestingly, the share of the cyclical portion in global earnings of Sensex is rising.
•
This, in our view, is earnings accretive as our global macro team is forecasting 4.3% growth in 2011. The downside risk is beyond 2012.
•
It is noteworthy that bulk of the cyclical portion of Sensex earnings is global in nature
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