Shibani Sircar Kurian, Senior EVP, Fund Manager & Head -Equity Research, Kotak Mahindra AMC, says “on a relative basis, we are not as expensive as one would have imagined simply because the entire emerging market pack has also gone up. That provides some degree of downside support to the market, even though near term, because of absolute valuations, we could see some volatility.
The way we have been constructing our portfolio is looking at pockets of growth where earnings growth sustainability is visible.”According to you, which is the most overvalued and undervalued pocket in the market, if there is anything undervalued according to you?Overall, market valuations are clearly on the upper side. If you look at the headline level, Nifty is now trading on a one-year forward basis, closer to one standard deviation above long term averages.
So valuations appear to be somewhat stretched. However, when you look at our market valuations on a relative basis, if you look at the premium of India to the emerging market peers, the good part is that India’s premium is at long term average levels.
On a relative basis, we are not as expensive as one would have imagined simply because the entire emerging market pack has also gone up. That provides some degree of downside support to the market, even though near term, because of absolute valuations, you could see some degree of volatility.
So the way we have been constructing our portfolio is clearly looking at pockets of growth where earnings growth sustainability is visible. Of course, as you said, valuations in this market being reasonable is difficult to find but what we believe is that the domestic facing sectors continue to be better placed simply because of the visibility of growth.
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