When many people wait for market to correct, it doesn’t happen: Singhania

MUMBAI: After a brief lull between March and May due to the second wave of the Covid-19, Indian equity markets are back near their lifetime highs. The Nifty50, the Nifty Midcap 100 and Nifty Smallcap 100 indices are all at or near their all-time high levels.

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 a confluence of top portfolio managers organised by PMS AIF World.

“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.