Radhika Gupta
Photographer: Kanishka Sonthalia / Bloomberg
Photographer: Kanishka Sonthalia / Bloomberg
According to Radhika Gupta, head of Edelweiss Asset Management Ltd., a record valuation of the earnings price of Indian stocks should not be a deterrent for investors.
Gupta, the only female CEO of a major asset manager in India, says it is “risky to have low-weight equities” at a time when local stocks continue to be “strongly” driven by liquidity. His company, which oversees 465 billion rupees ($ 6.4 billion) in assets, puts his money into operation: an Edelweiss balance The fund, which invests in both equities and bonds, has increased its equity allocation by around 75%, from just 30% in March.
“Looking at a single value metric or P / E is not a fair way to judge the market at a time when national economic activity is going down and you have such high liquidity,” he said. “We are business buyers. We are looking at the benefits of companies, the national economy, flows and the appetite for risk ”.
India’s benchmark S&P BSE Sensex has risen around 90% from its low during March 2020 wear and tear, breaking new records along the way. The rally driven by central bank liquidity and incessant foreign inflows have a trading gauge of more than 23 times their profits within twelve months. That’s an average multiple of five years about 18 times, according to data compiled by Bloomberg.
The Sensex fell 0.6% at 10:16 a.m. in Bombay on Monday, following major falls in Asian stocks. He completed an eleventh consecutive week of earnings on Friday.
Gupta’s optimism is at odds with the growing concern of many market watchers that stock prices in India have risen as the economy prepares. the largest annual contraction in records dating back to 1952.
Last week, the Reserve Bank of India also warned about the rally, citing a widening “Disconnect” between certain sections of the financial markets and the real economy. The RBI will do the same Start withdrawing cash from the banking system as you try to return to normal liquidity operations from emergency measures imposed by a pandemic.
TO READ: Record valuations raise alarm in India’s frantic stock market
Earnings, data
Gupta, on the other hand, points to the improvement in corporate profits and the strength shown in recent months by high-frequency economic indicators such as exports, car sales and manufacturing production, amid a rise in consumption. . Analysts surveyed by Bloomberg have reviewed the estimated twelve-month earnings for Sensex members by about 20% since their July drop.
“Much of the uncertainty surrounding the markets has diminished,” he said. “The second quarter was good for corporate earnings, led by margin expansion, queuing risk for banks has been limited and a couple of ongoing government reforms that tell you that the risk in the low is not very high “.
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Foreigners continue to accumulate Indian stocks, having bought $ 2.4 billion net in two weeks in the new year, after accumulating $ 23.4 billion in 2020. That was the highest since 2012.
“Vaccines and the low-interest environment we are in can be a very good thing for emerging markets,” like India, Gupta said. “We expect to see a better-than-expected performance scenario for the corporate sector. With the opening of closings, we expect revenue to return.”
TO READ: Mass transmission of vaccines begins in India despite safety concerns
(Add Monday’s moves to the fifth paragraph and update prices everywhere.)