Stock market valuation rich, most positives already discounted, says Raamdeo Agrawal of Motilal Oswal Financial Services

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Indian market is strong, said Raamdeo Agrawal, Chairman of Motilal Oswal Financial Services in an interview with the Economic Times (ET). "Right now, market trends are a lot dependent on the trends in FII behaviour. When FIIs were buying continuously for 15-20 days last month, it took the Nifty to nearly 20,000.

Now, they are selling and there is a reversal," Agrawal told ET. This correction may continue for some time as market valuation is expensive despite healthy June quarter earnings. However, Agrawal believes the market will run up again by the second quarter.

Agrawal is bullish on the Indian market as he highlights while the major economies like the US and China are struggling, India's economy is expected to grow at a pace of 6-7 per cent. "The sense we get is that the India story is unparalleled. When all large economies like the US and China are having problems and India is saying it will grow at 6-7 per cent, it is bound to be treated as an outstanding market," said Agrawal.

However, he also underscored that most positives may be already factored in. He also observed that due to the rich valuation of the market, there is no margin of safety if investors buy stocks in large quantities at the current levels. "The markets are not cheap either at the current (price-to-earnings or PE) multiple of 20-22 (times).

All the optimism is there in the price. Fund managers are worried that they will deploy at the current high PE and then the market corrects to 15-16 PE or the currency collapses. The issue is that there is no margin of safety if they buy big quantities at current levels," Agrawal told ET.