Business Business: Despite the geopolitical tensions, benchmark equity indices in the country are hovering at their record-high levels. Recently, the BSE Sensex hit the 82,000 mark, while the NSE Nifty hit the 25,000 mark for the first time. These record levels reflect the confidence of the investor community in India. Business Today spoke to Harshad Borawake, Head of Research and Fund Manager, Mirae Asset Investment Managers (India), to understand what lies ahead for the markets and what strategies investors should adopt to make money on D-Street. The market watcher said that after a sharp decline during the Covid-19 pandemic, India’s markets witnessed a strong recovery led by economic activity and earnings growth. With the elections over and a stable economic backdrop, the focus is again shifting to earnings growth and valuations. “In the short term, there is a mismatch between expected earnings growth and current valuations. Generally, being the festive season, the second half of the Indian financial sector is better from the domestic demand perspective. Therefore, barring any unforeseen event, as long as earnings pick up and rate cut expectations rise with softening inflation, markets may remain stable in the near term,” Borawek said.
Meanwhile, the midcap and small-cap segments have given strong returns to investors in recent times, but Borawek advised caution. “Over the past one year, the mid-cap and small-cap segments have rallied quite a bit in recent times,” he said. In this context, valuations of the mid- and small-cap index are trading well above long-term averages, while the large-cap index is trading closer to the long-term average.” Borawek said that as long as the earnings momentum sustains, there may not be a sharp correction. There are areas of excess in some sectors like industrials, which could see a correction. The focus should shift to more bottom-up and stock-specific selection. Talking about valuations, the Nifty50 index is trading at around 22 times FY25 and 19.2 times FY26, which Borawek considers reasonable, given the projected earnings growth of around 17% CAGR from FY23 to FY26.
