Indian stock market rose 20% in 2023, ending with gains for the record eighth straight year but valuations still remain a concern.
Despite all the segments in the market doing well, large caps continue to be cheaper and small caps are expensive, which is raising concerns, said Ajay Tyagi, head of equities at UTI Asset Management Co.
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"We were used to listening to hire for longer," Tyagi told NDTV Profit. "Despite all of this, the year is ending on a very solid note. The only piece of caution here for all investors is that valuations clearly are not in our favor right now."
Though large caps can't be termed as favorably placed—due to their longer-term valuation averages—they are still relatively more attractive than mid and small-caps, he said.
Among possible risks, geopolitics could be a key factor influencing many elements, according to Tyagi. If things move towards the worse, it could impact the cost of food in India and at the same time impact the inflow on income.
The other important factor that could impact the markets would be if the current government does not come back to power, he said. The markets will take a few months to come back to normal if such a situation arises, he said.
However, looking at India's growth these risks will not have a long-term effect and will only be limited to the small-term impacts, Tyagi said.
He leans towards private banks as they will be runners in the coming year, according to him. The second choice is consumer staples and durables. Despite being negatively impacted on account of weakness in rural India, consumer staples "should also see some bit of strength in the coming quarters", he said.
Watch the full conversation here:
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