India's ongoing stock rally can't be called a "mad bull run" and neither are valuations frothy, according to Sunil Singhania, founder of Abakkus Asset Manager.
Nifty 50 has only risen by approximately 7%, both in the past 18 months and year-to-date, he said on the sidelines of BQ Prime's The India Opportunity Summit in Mumbai on July 13.
“As far as valuations are concerned, I think profit growth has been phenomenal," he said. According to Singhania, the index is trading at 18.5-19 times its estimated FY25 earnings, which he said "is not cheap" but also does not fall in the "exuberant" category.
Still, he advises caution. Some broader market stocks have doubled or even tripled within just a few months, but investors need not get swept away by momentum in the market.
Even so, he does not expect Indian benchmarks to slide. "Yes, corrections can happen, but we don't see very deep corrections."
Big Opportunities
India's next big opportunity is a growing population of those with disposable income, Singhania said.
About 50 crore individuals fall within the income bracket conducive to consumer spending, a number he sees rising to 100 crore over the next 7-8 years. More people will go into the income bracket of Rs 6 lakh and above, which would lead to higher discretionary spending, according to Singhania.
Consumption Growth
Over the past two to years, inflation has surged, accompanied by a rise in interest rates. Singhania said this has led to an increase in equated monthly instalments, along with elevated costs associated with essential goods and services. But he said inflation and interest rates have peaked.
“Hopefully as the economy grows, income levels will also," he said. "We are quite optimistic that a little bit of a lag, we should start to see consumption picking up again.”
Watch the full conversation here:
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