IGI Logo

Surging valuations of Indian stocks have left investors with few value-investing options, with retail-oriented private banks and firms catering to rural consumption among those that seem likely reasonable bets, a fund manager at Mirae Asset Investment Managers said.

"There are pockets of froth we are avoiding, particularly, where valuations have surpassed fundamentals," said Neelesh Surana, chief investment officer – equity at the firm.

Mirae Assets Investment Managers (India) manages total assets worth over 1.64 trillion rupees ($19.79 billion), with Surana managing about a third at 540 billion rupees.

While the broader Nifty 50 index was trading 0.14% higher, the Nifty small cap 250 index was down by about 0.49% at 2:30 pm IST.

The country's market regulator last week curbed flows into schemes investing in small and mid-cap shares amid heightened regulatory concern on the surging inflows into these funds.

Nifty small-cap 100 index has surged 66.01% over the past 52 weeks and the Nifty mid-cap 100 index is up 60.64%, as of Monday 2:30 pm, far exceeding the benchmark Nifty's 27.34% rise over the same period.

Surana said that while there is froth, it is not spread across the broader markets.

"We are seeing some elements of froth in public offerings of small and medium companies which are getting subscriptions of as much as 15-20 billion rupees. There is too much money chasing particularly, in some small and mid-cap stocks," he said.

India will head into elections this year by May and Surana said markets might end up discounting the results, with largely a consensus on the ruling Bharatiya Janata Party securing a comfortable victory.

"Post elections, we are more optimistic on GDP growth, sectors such as IT services which are currently not performing, will do well," Surana said.

Moody's Investors Service on Monday raised its gross domestic product (GDP) forecast for India by 70 basis points to 6.8% for 2024.

($1 = 82.8910 Indian rupees)