“Definitely it should arrive. We have seen in the past that earnings momentum has been one of the best-performing styles or factors for India, and then it culminates into price momentum also happening through,” Batra said. He noted that India’s earnings have been muted over the past five quarters, with the PEG ratio hovering around 5x to 6x. “For being a better-valued market, it is not just the forward PE; investors want sustainable growth with a PEG of around 2.1, 2.2, and for that we need double-digit growth,” he added.
Batra explained that earnings momentum is key to triggering price momentum. “A month or two—if earnings momentum comes, price momentum follows it,” he said.
When asked about the impact of recent GST and indirect tax cuts, Batra said: “Definitely, theoretically yes… when you are seeing monetary policy easing, income tax rate cuts, GST cuts, you cannot defy the economic logic that you are moving from a vicious cycle to a virtuous cycle where things will improve.”
Addressing foreign fund flows, he clarified that local investment, rather than foreign inflows, has primarily driven rallies in other emerging markets. “If we have a plethora of flows coming from both sides, active as well as passive, it will start coming into India also. Remember, India even today is the second-largest market in weighting terms in MSCI EM after China,” Batra noted.
On valuation and growth, he emphasized that India is fundamentally a growth market. “Investors come to India as growth tourists. If that premium growth goes away, you will never come,” he said. He added that if India can return to double-digit earnings growth, valuations would become secondary. “Your PE can even command the 25 mark if you are delivering 10%, 11%, or 12% kind of earnings growth,” he explained.Batra also highlighted the importance of structural reforms. “We have already seen that under Prime Minister Narendra Modi’s government they have launched three arrows: monetary policy easing, tax rate cuts, and GST. Now the market is looking for the fourth arrow,” he said, identifying deregulation and easier market access for FPIs and FDIs as key triggers for further rerating.India’s market revival, according to Batra, is likely to be a combination of earnings growth, policy support, and structural reforms—factors that could collectively restore investor confidence and reignite momentum in the months ahead.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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