The stock markets will be looking to the next earnings season starting in a little over three weeks from now (after the second quarter), for determining its momentum, Anup Bagchi, MD & CEO of ICICI Securities, said.
Stock markets have been buoyant in the backdrop of a new Government taking over with a stable majority in parliament and the improved prospects of faster economic growth. In the last six months, the Sensex has gone up by 5,000 points to 27,061. So far, valuations have been supported by a wave of optimism and that has played out now. However, the next stage will have to be supported by cash flow and earnings, he said.
Bagchi said he expected interest rates to turn benign in about six months. For this to happen, fiscal deficit and inflation will have to come down, he said.
Liquidity has to come back to the system and this will happen when the Government starts releasing payments. This will reduce hoarding tendencies among larger corporates who tend to choke the funds flow to smaller companies, he said.
“Resolving issues around getting returns from stuck investments, removing bottlenecks to enable faster turnaround on setting up business and reducing the cost of doing business to capture opportunities will lead to a multi-year structural bull-run,” he said.