Concern on market valuation unwarranted: Birla MF

Birla Sun Life Asset Management Company wants investors to ignore the growing noise of concern over market valuation and focus on asset allocation to generate long term wealth through mutual fund investment.

• Also read: AB Sun Life AMC profit up 80 pc on higher AUM

A Balasubramanian, Managing Director, Birla Sun Life Asset Management Company told businessline that the high valuation of Indian equity markets compared to global peers is justified given the certainty of future economic growth amid turbulence in the global market.

All lead indicators such as the GST collection, robust private capex, stable inflation, and improved bank and corporate balance sheet point to better GDP growth going ahead, he added.

• Also read: GST collections surge to ₹1.72 lakh cr in Oct, second-highest ever

“I think macro factors are all indicating towards growth coming back gradually, except in few sectors. The expected growth when realised should keep the overall balance between the market valuation and economic growth,” said Balasubramanian.

The concern over valuation will erupt only when overseas fund flow shifts completely from India. Though valuation of other emerging markets are cheaper, they have their own challenges and foreign investors find it difficult to re-invest in Indian equity at a lower valuation like in the past as domestic institutions fill-in the gap, he said.

“Historically I have seen valuation is never an issue as long as we remain a promising growth economy,” he added.

Moreover, globally inflation also seems to be on its way down and growth slowdown in the US may lead to the US Fed cutting rates in coming months, he said.

The markets will get further support if the US Fed starts cutting the rates. Till then, market may remain range bound and move up or down five per cent after rallying significantly in last few months.

• Also read: Fed leaves rates unchanged, acknowledges economy is ‘strong’

“I think the opportunity to sell seems to be getting limited because fundamentals of the economy are getting better with each passing months,” he said.

The performance linked incentive has boosted the manufacturing sector with the focus on imports substitute across sectors. Power demand has been rising steadily indicating robust activity in the manufacturing sector, he said.

Investors should focus on multi-asset allocation to take advantage of price movement in different asset class including equity, debt, gold and commodities, he added.

COMMENT NOW