Local investors are critical for the ‘overvalued' Indian equities to keep outperforming their emerging-market peers more so in the absence of foreign inflows, according to Mahesh Nandurkar, India strategist at CLSA.
“Domestic flows have been very resilient and it is one of the strongest points in favour of the (Indian) markets,” said Nandurkar in a conversation with BloombergQuint. “Domestic investor support is critical for markets to perform as I don't see foreign money coming in any big way, just as yet.”
India is the only big emerging market economy trading at a premium to historical averages compared with economies like China, Brazil and Korea, Nandurkar said, adding that a correction of another 5 to 7 percent is needed to trade at fair valuations.
Other Highlights
Takeaways From Q2 Results
- Change in trend in bad loans cycle. The gross NPA ratios have come down in the last two quarters.
- Provision ratios for banks have gone up consistently which should offer much more comfort.
- IT services hiring has reached the highest level in the last two years.
- Cement will see more earnings revisions on the downside due to market anticipation of steep price hikes.
Sectors Looking Attractive Ahead Of Elections
- Bullish on rural consumption theme; consumer staples and auto stocks that offer rural exposure.
- Power utility, Oil and gas, tobacco space provide a few pockets of investment opportunity ahead of the polls.
Two-Wheeler Space
- Mass-market two-wheeler segment is not attractive in the long term as the industry has reached its saturation point.
- Premium segment penetrations are still low and growth potential exists for the next one or two decades.
On Liquidity Issues Faced By NBFCs
- Rising interest rate environment is an advantageous situation for private banks.
- The current liquidity issue will only accelerate the market share shift from NBFCs to banking space.
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