Corporate profits to GDP shot up in FY21 because GDP growth contracted. Whenever nominal GDP growth is increasing and it crosses 10%, corporate earnings growth is faster. Over the next two-three years, if we have 5-6% inflation and 6-7% real GDP growth, we will have nominal GDP growth of 13-15%; this should boost earnings growth after a tepid growth rate between 2011 and 2020. You can have earnings growth, but you can also have a derating in PE, which can neutralize earnings growth. They keep showing 12-13% earnings growth, but never get derated.

Source: Mint July 22, 2021 18:22 UTC