«So, basically, two years ago we started with very inflated multiples and slowly earnings are growing and multiples are falling. So, essentially from that perspective if you think about it, Nifty has underperformed debt returns over a two-year period,» says Vikash Jain, India Strategist, CLSA.
After very long we are seeing Nifty coming in at 20,000, but overall in the market scenario how are you seeing this market currently in terms of valuation? What is that looking like? Do you think it is something attractive in the market or maybe one should just wait and watch sometimes?
Sure, I think, yes, 20,000, is a great psychological mark.
We have not spent much time above it, although we did make a new high, slightly higher than this. However, what we need to look at is what has been happening in the markets over the last two years.
In the last two years there has been a kind of a de-rating in multiples.
For example, if you were to look at two-year returns on Nifty, I am talking about specifically, it is a paltry 15-16% in two years, at a time when earnings have actually grown more than 30% or so.
Basically, two years ago we started with very inflated multiples and slowly earnings are growing and multiples are falling. So, essentially from that perspective if you think about it, Nifty has underperformed debt returns over a two-year period.
So, yes, it is making new highs but it is still in a kind of a situation where it is impacted by the starting point which is a very high valuation.
Valuations have not really cooled off to levels which are palatable.
I think that process is a multi-year process. India, with such a strong long-term story, the market is not crashing, but it is slowly catching up, getting to average