Morgan Stanley's Ridhan Desai however feels the earnings data does not reflect the complete picture and that the capex cycle is slowly picking up
Corporate earnings for the December quarter have been the worst since the global financial crisis, leading to a sense of frustration within India Inc.
That is because the effects of policy reforms are still not visible on the ground.
Morgan Stanley's Ridhan Desai however feels the earnings data does not reflect the complete picture and that the capex cycle is slowly picking up.
"Fixing inflation has caused growth to weaken in the short run (inevitable pain), but has set up India for better growth in the coming months. Remedying stalled projects was a more complex problem, but recent capex data shows that things are turning," writes Desai in a Morgan Stanley note to clients.
"These actions will eventually filter into earnings, but for Corporate India an improvement is not on hand whereas stock prices are rising. This makes the market look wrong, although arguably the market is not concerned with how Corporate India feels today, but how it is likely to feel 12 months from now," the note says.
Desai concludes the note by saying that India Inc will likely feel a whole lot better by February 2016, as a consequence of concerted policy actions coupled with the global dynamics.
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