Kashyap Javeri, Head of Research and Fund Manager at Emkay Investment Managers Limited, emphasizes the importance of focusing on company-specific growth and valuations rather than relying solely on index-level valuations. He argues that India's markets should not be judged by the Nifty's headline PE multiple, as opportunities remain attractive on a PEG basis.
Javeri points out that the Nifty 100 trades at a 21x PER compared to 14-17x PER in many emerging markets. However, he cautions against drawing conclusions based solely on these numbers due to the skewed composition of indices in some markets. He highlights SEBI's regulatory oversight as a factor that mitigates undue influence of a few stocks on the market. Javeri believes that a stock-specific approach reveals numerous opportunities for investment.
Despite strong earnings growth in mid- and small-cap companies, index-level valuations have not corrected aggressively. Javeri attributes this to the composition of the Nifty 100, where BFSI, IT, and RIL account for nearly 47% of the weight. He notes that the Nifty Midcap 150 and Nifty Smallcap 250 indices have shown healthy earnings growth, with the former reaching an all-time high.
“We believe that if one shifts focus from headline numbers on PER and earnings to more focused stock-specific approach, there are plenty of opportunities available in the market to deploy money.”
Kashyap Javeri, Head of Research and Fund Manager at Emkay Investment Managers Limited
Javeri observes that domestic institutional flows are largely driven by SIPs, which have increased from $17 billion in FY22 to nearly $40 billion in FY26. He warns against dismissing SIP flows as lacking investor conviction, noting that retail investors have shown significant commitment.
While foreign portfolio investment (FPI) flows have been modest, Javeri notes early signs of fatigue in FPI selling. He highlights that FPIs were net buyers in 26 out of 40 trading days in Q2FY27 and emphasizes the importance of gross inward FDI, which stood at $95 billion in FY26.
Javeri warns of potential risks from elevated US bond yields, rising crude oil prices, and a weakening rupee. He notes that India's import bill on petroleum is $180 billion, and a decline in FX cover could lead to currency depreciation. He remains optimistic that FCNR deposits and FDI inflows will help mitigate these risks.
Background
The Indian stock market has been under scrutiny due to its premium valuation compared to other emerging markets. However, the diverse composition of indices and regulatory measures by SEBI play a crucial role in shaping investor perceptions. The rise in SIP investments and the resilience of mid- and small-cap earnings growth further underscore the complexity of the market landscape.
As investors navigate the Indian stock market, attention should be paid to stock-specific valuations and growth prospects. While macroeconomic factors like crude oil prices and currency fluctuations pose risks, the continued strength of domestic flows and foreign investments offers a positive outlook for future market performance.
