“We have been surprised by the recovery in the Indian market, but even at current levels, the market cap-to-GDP in India is still not excessive,” Jain said at the ETMarkets Global Summit 2021.
Nifty50 and BSE Sensex have nearly doubled in value since hitting their multi-year lows in March at the peak of the Covid-led panic in global financial markets led by strong foreign inflows, signs of domestic economic recovery and accommodative global monetary policy.
Jain said the market is not yet excessively valued and that from a medium to long-term horizon, it still holds a lot of promise.
Jain argued that valuations in certain segments of the market are deeply depressed compared with their long-term averages, while some other pockets have run far ahead of their long-term averages. He indicated that the reversion to mean could now play out in the former segments, which include sectors like metals, consumer electricals, power, tobacco and others.
Jain also sees further prospects in India’s information technology stocks and expects revival in capital expenditure going ahead. “If India can capture the opportunity provided by the pandemic to improve its share of global manufacturing, then that could significantly boost the country’s GDP,” he said.
“We are quite optimistic about earnings. We have firmly come out of the corporate NPA cycle and as provisioning at banks come down, it will have a very big impact on Nifty earnings growth,” Jain said.
He, however, cautioned that if interest rates at home or abroad rise at a faster pace than anticipated, then markets could hit an air pocket.