Vikash Kumar Jain: Wary About Expensive Stocks While Inflation ...

MarketsVikash Kumar Jain: Wary about expensive stocks while inflation remains at the fore

• Avanne Dubash
• Updated Jun 21, 2022, 12:48 IST

Vikash Kumar Jain, CLSA Investment Analyst, India spoke to ET NOW sharing his strategy outlook, markets in a high interest rate environment and valuation outlook. Jain said that we are reaching a point where historically we have had reasonable rallies.

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New Delhi: Vikash Kumar Jain, CLSA Investment Analyst, India spoke to ET NOW sharing his strategy outlook, markets in a high interest rate environment and valuation outlook. Jain said that we are reaching a point where historically we have had reasonable rallies. “This is largely a 'financial crisis'- way different from demonetization or a pandemic. Two-thirds of Emerging Market funds are underweight India at the moment.”

“We have reached a point where valuations will become attractive for foreigners. Valuations are at 5% of historical (17 year) average levels. How much we rally is dependent on what happens to bond yields. I think inflation in India has peaked,” says Jain. He believes that adding DLF to India focus portfolio- is due to the favorable real estate cycle.

The latest CLSA report states that the overall weak GDP growth and higher inflation were a drag on macro indicators. The report says that early indicators for April-June have been impacted by the base of Covid lockdown, diesel consumption along with registration of two and three-wheelers and commercial vehicle sales which are still below pre-Covid levels.

Jain is of the view that the trend of falling prices is not strong anymore which provides confirmation that the sentiment is not weak any longer. “I believe we are not in a waterfall decline. The texture of these corrections indicates that this correction appears to be a shallow- not a 40% kind of correction.” He believes that for some time, we are going to stay in a largely macro market. “What happens to yields will be of supreme importance. I would be wary about expensive stocks while inflation remains at the fore. Maybe stay away from Consumption stocks with expensive valuations but I do not see many balance-sheet concerns for banks over the next 12-15 months,” he said.

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