Nimesh Chandan, CIO of Bajaj AMC, on market valuations and IT sector
Nimesh Chandan, Chief Investment Officer at Bajaj AMC, believes that the overall market does not exhibit characteristics indicative of a bubble, but caution is warranted, especially in the context of the global environment.
He said that the largecap valuations as represented by Nifty P/E are in the range of 19-20x P/E, which are slightly higher than average but not without reason. Some pockets in the smallcap and midcap space are trading at significantly elevated valuations.
Chandan said that every time the market experiences a rally, there is a tendency to believe that “this time is different”. However, he believes that it is equally risky to assume that all circumstances are always the same.
He said that the current global macroeconomic conditions are not as stable and favourable as they were in the past. But India currently finds itself in a Goldilocks scenario, with strong economic growth and low inflation.
However, he said that it is important to acknowledge global uncertainties, such as rising inflation, policy rates, and crude oil prices. These factors can exert significant influence on the Indian market, which is intrinsically linked to the global economy through trade, capital flows, and inflation dynamics.
He said that it is essential to recognise that Indian market movements cannot be isolated from global market trends. While certain pockets of the Indian market exhibit high valuations, the broader market remains closer to its long-term average. Caution is warranted, especially in the context of the global environment.
On the IT sector, Chandan said that it relies significantly on exports to the European and US markets, with a particular emphasis on the banking sector. Any issues that cause a slowdown in the global economy, particularly in the United States and Europe, can exert pressure on Indian IT’s topline performance.
However, he said that the IT sector is still expected to grow at a healthy pace in the coming quarters, driven by factors such as digital transformation, cloud adoption, and increasing demand for IT services from emerging markets.
Overall, Chandan believes that the Indian market is in a good position to weather the current global uncertainties. However, he advised investors to be cautious and selective in their investment choices.
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