British brokerage Barclays has trimmed its year-end Nifty target to 9,642 from 10,219 on account of continued "underwhelming" trend in overall corporate earnings. According to Barclays latest report, Indian earnings have now remained stuck in single-digit growth territory for the past three years.
While, the firm expects an earnings bounce back in the second half of the current financial year in sectors like consumer, financial, healthcare and capital goods, it said, "the postponement in earnings recovery leads us to reduce our 12-month forward Nifty index target to 9,642 from 10,219". Barclays noted that, while earnings performance of India Inc for the first quarter of 2015-16 "was by and large weak, on account of a weaker-than-expected demand recovery", there were signs of improvement in demand in a few sub-sectors in the consumption and industrial sectors.
As per the report, the bounce back in earnings is underpinned by an expectation of better fiscal policy in terms of higher capital expenditure by the government and also an improvement in consumption as lower oil prices trickle down to consumers. Meanwhile, Barclays also said that its expectations from the monetary policy is muted. "Our economists look for a 25 bps rate cut before March 2016 and FY16 average consumer price index (CPI) of 5%," it added.