Markets readjusting to change in earnings expectations: Dipen Sheth

In a chat with ET Now, Dipen Sheth, Head – Institutional Research, HDFC Securities, shares his view why the market is seeing acute volatility these days.

ET Now: I wish to get your views on the outlook for the market. There are a number of factors that we can attribute as to why we are seeing such an acute volatility in the market. Over the next six months, would you have a circumspect view? Do you think that some of the reform measures-driven euphoria would give way to cautious optimism?

Dipen Sheth: Euphoria would obviously always give rise to some kind of levelling off of emotions. That is what is playing out in the market right now.

It is not that the India story is getting structurally ruptured in any way. Prices and, thus, valuations had run ahead of earnings. This is the period where we can see a time correction. The more we talk about the Modi story not being playing out, the more we will see this kind of volatility.

That said, we are okay with that. We think that the longer-term story for India has changed meaningfully.

It is just that stock markets are readjusting themselves to the fact that earnings growth will not immediately take off and that a sustained period of healing and, course correction, will happen before the real economy takes off.

To that extent, the market will mirror this kind of more realistic set of expectations rather than any euphoria similar to the time the one when Modi came to power last year.