Indian markets are trading at 15% valuation premium versus 10-year average- Bhattacharya, CIO, Equities, Edelweiss MF

livemint.com:

DMart share price drops nearly 4% after Q3FY24 business update; what should you do? As regards Indian equities, in the medium-term, as per Bhattacharya said two positives which give strong and convincing basis for an optimistic view. The first positive is that India Inc’s balance sheet is in de-leveraged mode. It is operating at high-capacity utilisation.

These factors could lead to a capital expenditure cycle in 2024. The second positive about the Indian markets is the moderating inflation. This could improve consumers’ spending power over a period.

Bhattacharya expects that in 2024 inflation and interest rates will begin to fall. It will put some more money in consumers’ pockets. This will boost demand for goods and services in a few sectors as opposed to other sectors.

Besides this, the pace at which interest rates will come down will have a bearing on the growth in corporate earnings to a certain extent, said Bhattacharya. At present, broadly speaking, Indian markets are trading at about 15% valuation premium versus 10-year average. In this context, while large-cap stocks’ valuation multiples are trading at par, mid- and small-cap stocks are trading meaningfully higher than their 10-year historical average, as per Bhattacharya.

Thus valuations are in favour of large-cap stocks in the short term, while mid- and small-cap stocks have the potential to generate superior earnings growth over the medium-term. Also Read- NMDC share price rises 73% in last one year scaling 52 week highs recently. Should you Buy, Sell or Hold ? Taking into account these factors, Bhattacharya advised investors to maintain a balanced portfolio across market capitalisations.