Indian share markets continued to trade flat during the afternoon session amid mixed international markets. At the closing bell, the BSE Sensex closed lower by 58 points, while the NSE Nifty closed lower by 17 points. Meanwhile, the S&P BSE Mid Cap and the S&P BSE Small Cap finished up by 0.2% and 0.3% respectively. Gains were largely seen in metal stocks, pharma stocks, and power stocks. Software stocks and oil & gas stocks witnessed selling pressure.

Earnings Yet to Catch Up with Valuations

The markets are touching record highs every day. It makes sense to sit back and evaluate if the fundamentals are in place for such heady growth. When one looks at corporate earnings over the past 5 years, it paints a different picture.

The corporate results for the fourth quarter of financial year 2016-17 also highlighted the slowdown in the economy. The combined results of 2200 odd companies largely showed decent numbers, but still a sharp decline from the third quarter of 2016-17.

Housing finance companies finished the trading day higher as the Reserve Bank of India (RBI) on Wednesday made it possible for banks to lend more to home buyers, that too at lower interest rates in a move that should benefit customers as well as real estate developers. The central bank did this by reducing the amount of money that the banks have to set aside (as security) on home loans.

Previously, they had to set aside 0.4%, or Rs 400 per lakh. This has now been reduced to 0.25%, or Rs 250 per lakh. Housing Development Finance Co Ltd (HDFC) share price rose 2.3%, GIC Housing Finance Ltd share price rose 1.5%, Indiabulls Housing Finance Ltd share price finished up by 0.6%.

Reliance Communications (RCom) Ltd share price continued to fall and finished down by 3.1% to Rs 18.75 after global agencies Moody’s Investors Service and Fitch Ratings downgraded the long-term debt rating of the company and its US$ 300 million worth of senior bonds.