India's Valuation Not Expensive Given Earnings Growth, Says Julius Baer's Mark Matthews

India's valuation is not expensive given the earnings growth and overall economic growth story the country is offering, Julius Baer Managing Director Mark Matthews said. From a three-year perspective, if India Inc. continues to deliver earnings in the range of 10–15%, NSE Nifty 50 trading at 20 times price-to-earning forward multiples is not expensive.

India's story looks good from multiple fronts. The country is attracting more foreign fund inflows as the dollar index continues to decline, Matthews said.

The growth looks strong, inflation has come down, and the Reserve Bank of India has reduced rates and reserve ratios. The Government of India is again investing in public sector capital expenditure. India Inc. will likely post a good earnings' growth, he said.

Around 12 crore people will join the working-age population category, subsequently raising the per capita GDP. When per-capita GDP goes up, people will invest in stocks. As of now, 5% of Indian household assets are in stocks. All the factors make a good picture. Investors should now take advantage whenever there is weakness in the market, Matthews said.

Banks are the heart of the economy, so Julius Baer is sticking to that segment. As economy does well, banks will do too, he said.

People are worried about spending in the IT sector. Between these two extremes, there are materials, hospitals, and consumer etc, he said.

US Beneficiary Of Oil Price Rise 

US is technically the net beneficiary of a rise in crude oil prices as it has been a net exporters of crude oil, he said.

Oil prices are rallying towards $80-per-barrel mark as Israel and Iran continue to exchange missiles and drones since the former launched airstrikes in strategic location of Iran on Friday. At some point, Israel and Iran have to stop. However, there may rise unforeseen consequences in the future, according to Matthews.

Technically, the S&P 500, the global benchmark, is looking quite constructive. There was a 20% up-move since April to early June. It's a bullish rise which happened only five times since 1950. The US markets are looking strong, Matthews said.