With the headline index trading close to 23 times one-year forward earnings, it has raised concerns over valuations getting too rich for their own good. Sunil Singhania, founder and fund manager at Abakkus Asset Manager, believes Indian stock market is not in any ‘euphoric zone’ as yet despite what appear to be rich valuations.
A solid recovery in corporate profits over the past year despite the pandemic is evidence that the market is pricing strong future earnings growth. Overall corporate profit growth in 2021-22 could well exceed 35 per cent, Singhania said at an event organised by PMS AIF World, an alternates focused, content-backed new-age investment services company.
“If the profit pool goes back to 6-7 per cent of GDP, then we are still in a very healthy place (in terms of stock valuations),” Singhania said.
The veteran asset manager said nominal GDP growth in India could easily go back to double digits in the coming years, and that would be very healthy for the market.
“When we meet large family offices… I have never seen such an under-investment in equities. There are people waiting for the market to correct 10-15 per cent to invest, but when so many people wait for a correction, it usually does not happen,” Singhania said.
