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Indian markets will continue to command a valuation premium. Here's why experts think so

Indian stock markets have been hovering around their record high levels as BSE's Sensex is holding above 73,000-mark, while Nifty50 is just shy away from 22,300-levels.

Indian markets will continue to command a valuation premium. Here's why experts think so

Market participants believe that Indian equity markets will continue to command a valuation premium compared to the global peers, thanks to increased participation from the domestic investors, who are pumping in money in the local stocks through SIP and direct investments.


Sharing his views at Anmi’s 13th International Convention 2024, Ajay Kejriwal, MD and CEO at Choice Equity Broking said that domestic money is coming in a big way through retail investors, whose base is growing at a rampant pace as the SIPs are becoming popular.


"Shift towards equity markets for long-term investment is a major shift, which absorbs the jerks led by volatility when FIIs are selling. Valuation premium will remain in the Indian market on the back high retail base and there will be scanty pockets for smart money as the demand remains high."


Indian stock markets have been hovering around their record high levels as BSE's Sensex is holding above 73,000-mark, while NSE's Nifty50 is just shy away from kissing 22,300-levels, delivering a return of 25 per cent in the last one year. Even the broader market, the BSE midcap and the BSE smallcap index have surged 66 per cent and 70 per cent in the twelve-month period.


Seconding his Kejriwal's notion, Deepak Kumar Lalla, MD & CEO at SBICAP Securities said that India's stock market-to-GDP ratio is 120 per cent at roughly around $4.7 trillion. He said that it is still lower than global peers but investor confidence in the Indian equities is moving up and the growth momentum will continue.


"Retail participation is set to improve over the period as all long term factors including macros are supportive for the markets," said Lalla from SBICAP Securities.


However, market experts cautioned that equity space is not a risk free investment avenue and there might be some short-to-mid term headwinds. Some experts believe that markets are at record highs, which warrant a word of caution but that does not mean that there are no options of making money.


Ashok Kumar Agarwal, Chairman and Promoter of Globe Capital Market said that markets are overheated and they were also overheated during the Harshad Mehta scam, dotcom bubble of 2000s, economic crisis of 2008 or any other instances.


"Markets may appear fully priced, some stocks may be heated above their historic or peer average and some might be manipulated, but if one is invested in the market like India, they are set to make good money as India's journey has just started. Policy changes are positive for India and India will become a developed country by the year 2047."


Agarwal said that India should change its thinking regarding currency depreciation, which is often argued to be good for exports of a country. Citing China's example, he said that offshore Yuan depreciated 1 per cent a year on an average since 1993, while local rupee belittled 5 per cent per year. "Currency depreciation is not good, even for exports and we need to alter this thinking."


Abhisar Jain, CFA, Head and Fund Manager, Monarch AIF said that markets are driven by fundamentals and flow and both are at the historically best level supported by structural improvement. Sectors like infrastructure including road, energy, power, luxury, consumer discretionary, and wealth management businesses will do better,” Jain said.



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