Market Dip? Kotak Neo Says Indian Equities Now Offer Attractive Valuations
Shrikant Chouhan of Kotak Neo explains why current market volatility creates a buying opportunity for quality Indian stocks.
Despite the current wave of market volatility, the Indian equity market is presenting a compelling entry point for investors. Shrikant Chouhan, the Head of Equity Research at Kotak Neo, suggests that the current pricing of stocks is reasonable and offers a strategic opportunity to pick up quality assets.
Reasonable Pricing Amidst Challenges
In an exclusive conversation with ANI, Chouhan highlighted that the market has already priced in many of the existing challenges. He pointed out that the market is currently trading at 16 times the FY28 earnings, a level he considers reasonable for those looking to invest.
Analyzing the Nifty, Chouhan noted that the 22,000 mark has historically been a zone that attracts buying interest. While he cautioned that continued selling in the small-cap and mid-cap segments could temporarily drag the index down to the 21,750-21,800 range, he believes such a dip would be short-lived—provided crude oil prices do not surge beyond USD 120 per barrel.
The Rupee and Foreign Investment Flows
Addressing concerns over the Indian rupee, Chouhan credited the government and the Reserve Bank of India (RBI) for their effective measures in limiting depreciation. He noted that policy reforms and inflows from significant initial public offerings (IPOs) helped the currency recover from the 96-97 range to approximately 94-94.50.
While Foreign Institutional Investors (FIIs) have continued to withdraw funds, Chouhan observed that this outflow has slowed over the last 10 to 12 days. He expressed confidence that the RBI's interventions are helping control the rupee and, by extension, the overall outflows.
A Global Shift in Investment?
There is a possibility of a pivot in global investment trends. With technology-heavy indices like the Kospi and Nasdaq facing selling pressure, Chouhan suggested that investment flows might shift toward emerging markets. He added that the sustained foreign outflows over the last two years have actually worked in favor of long-term investors by creating attractive valuations in several Indian stocks.
While the broader market has seen a correction of 10-15%, some individual stocks have plummeted by as much as 30-35%, opening a window for opportunistic buying.
Global Triggers and Sector Outlook
On the global front, Chouhan viewed the decline in US bond yields—dropping from 5.30% to 4.95%—as a positive signal for financial markets. However, he emphasized that crude oil remains the critical variable. He noted that any easing of tensions or positive diplomatic dialogue between the US and Iran could trigger a sharp upward movement in the market.
Where to Invest and Where to Be Cautious
Rather than waiting for a sudden rally, Chouhan advised investors to begin accumulating quality stocks at current levels. He provided a clear breakdown of sector-specific views:
- Positive Outlook: Kotak Neo remains bullish on private banks, hospitality and tourism stocks, and mid-sized IT companies.
- Under Pressure: The auto sector is expected to struggle due to limited earnings growth and the impact of rising crude oil prices.
- Cautionary Zones: Pharmaceutical stocks are flagged as they are nearing peak valuations after a sharp six-month rise. Similarly, hospital stocks are under scrutiny due to increased regulatory interventions.