Are valuations stretched? Sachin Shah weighs in on smallcap and midcap risks
«Of course, structurally, we may see a higher interest rate compared to the history or the past, but still, they should be significantly lower from what they are today, at least 100 to 150 bps or maybe closer to 200 bps lower over the next 12-18 months so that is another very big positive,» says Sachin Shah, Emkay Investment Managers.
First up, the market view itself because, of course, while a lot of people have been saying that we are toppish and the fundamentals perhaps are getting overshadowed by liquidity right now, what is your view on where the market momentum lies and what should we factor in for the market peak?
Sachin Shah: I think it is getting kind of a consensus view that the valuations are getting a bit stretched, at least in some pockets of the market, particularly the smallcaps and midcap, those kind of things, and of course, the largecaps are much more reasonably valued.
This is a fairly general consensus view. But I think what is also important to observe is that we are seeing a lot of macro positives which are playing out for India.
Say, for example, in the last 10-15 days, we have seen oil prices coming off quite a bit. It is almost down by more than 10%. We are now in the range of 70-odd dollars, much below the 80 dollars, so that is one very big positive for a country like India.
The other thing is also in terms of the inflation kind of now being under control, not only in India, but in the domestic markets. So, clearly, we are going to see cooling off of the interest rates and the benefit
