Indian Stock Market Valuations Unattractive Despite Correction, Says Swanand Kelkar
Kelkar advised against expecting high returns from market indices, citing slowing earnings growth and unappealing market valuations.
Indian markets may be experiencing a correction after a recent period of high activity. Swanand Kelkar, managing partner at Breakout Capital Advisors, believes that navigating the road ahead will require caution.
Kelkar advised against expecting high returns from market indices, citing slowing earnings growth and market valuations that, although they have seen some correction, remain unappealing, during an interview with NDTV Profit.
Kelkar likened the recent four-year market boom to "the heavy-hitting overs" in a cricket match, which was fuelled by exceptional earnings growth—particularly in the banking sector. With that phase now behind us, he emphasised the importance of adjusting expectations. "The market is now shifting from a beta market to an alpha market," he noted, highlighting the need to focus on companies capable of delivering consistent and sustainable growth.
Swanand Kelkar, managing partner at Breakout Capital Advisors. (Photo source: NDTV Profit)
While Kelkar's firm does not strictly differentiate between large-cap and mid-cap stocks, he sees potential for stock-picking opportunities in large caps due to their valuation versus growth metrics. "We're not operating in absolutes," he stated, underscoring the importance of evaluating individual companies with strong fundamentals rather than relying on broad categories.
He also pointed out that capital self-sufficiency is a critical screening criterion in India, where growth opportunities are abundant. "We don't screen for growth; we look for companies that can generate free cash flow while growing sustainably at 15–18%," he explained.
Kelkar identified two promising investment areas: electronics manufacturing services and the investment sector of the economy, which he favours over consumption.
Regarding platform companies, he views consolidation as a positive trend, especially in sectors like food delivery and quick commerce. "The funding winter has eliminated smaller players, leaving established platforms in stronger positions," he noted, adding that profitability and cash flow are now the main drivers of investor interest in these businesses.
Kelkar's advice for investors is straightforward: aim for your singles and doubles while focusing on alpha-generating opportunities, instead of anticipating another phase of easy sixes.
