Nomura sees distinct recovery in top-line growth

Maintains 33,500 Sensex target by Dec-end, suggests over 18% upside from current levels

Foreign financial services firm Nomura believes a shift in overall corporate sales figures suggests an earnings recovery is on in the economy.

At a press interaction on Thursday, its officials noted net sales growth in the June quarter over the previous one was stronger than in any period over the past three years. It added that weakness in commodity prices had hit sales growth of local commodity-linked companies but margins for commodity users have been rising.

Nomura said it would maintain its earlier year-end target for the market, even after the central bank held back on further rate cuts. “Earnings have generally been okay…Markets have rallied into the results,” said Prabhat Awasthi, managing director & head of equity, Nomura India.

Nomura has said it expects the BSE exchange's benchmark index, the Sensex, to reach 33,500 by the end of the year. This is 18.4 per cent higher than Thursday's close at 28,298.13.

The Reserve Bank of India decided earlier this week to keep interest rates unchanged, at its policy review. Sections of business and the market had been asking for lowering of rates to push growth.

Nomura says there is little evidence of a shift away from emerging markets. Foreign investors still think of India as one of the few destinations that can continue to deliver sustainable growth over a three-year period, said Sonal Varma, India economist at Nomura.

She added a pick-up in foreign direct investment is also a positive, with stable money helping to bridge the current account deficit.

Awasthi also noted a large amount of domestic money was coming into the market. This would help capital flows. Pension funds are also investing, he observed.

The Rs.6.5 lakh crore Employee Provident Fund Organization began its first-ever investment in the markets on Thursday. It is likely to put Rs 5,000 crore this year, an amount expected to increase in the years ahead.