Finding value in equity markets is tough and it is even tougher to put money when the market trades at record highs. Yes, valuations of Indian markets do look stretched but there are plenty of stocks which are ‘value for money’ even at current levels.
The action was more pronounced in small and midcap stocks which gave double-digit returns in a relatively small period of time. A prudent strategy for investors would be to focus on quality because most stocks are already trading at lofty valuations.
Even though D-Street celebrates record highs on Nifty, there are one lingering concerns – fundamentals do not support the rally. A lot of it is hope based. Valuations remain rich and earnings recovery will still take some time.
Even though foreign investors continue to dump equities, domestic institutional investors (DIIs) poured in close to Rs 20,000 crore in the month of August alone – which is an all-time high.
"Continued inflow in domestic funds, benign interest rate environment, stable currency coupled with favorable global cues is driving markets higher. Anxiety in global markets over North Korea has tapered off,"
He believes while valuations are not euphoric, they are rich versus long period averages and therefore support from earnings pickup is critical to sustaining these valuations, going forward.
“We prefer largecaps to midcaps owing to valuation gaps. Earnings visibility and valuation comfort are key determinants for preferred ideas," Duggad said.
Many stocks have more than doubled investors’ money in the last one year and so far in the year 2017 especially in the small and midcap space. But, not every stock in the broader market is a buy.
Investors should look at stocks which are low risk and are trading at levels which may look expensive but justifies future growth potential of the stock.
“We follow bottoms-up approach for all our schemes. We have clearly articulated investment framework for each scheme. We follow our investment discipline while investing inflows and we keep a close focus on risk management,”
“In the near-term, we are cautious. However, we are positive on domestic-oriented businesses from a medium to the long-term point of view,”
Investment & trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance.
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