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SBI Funds Management, the country’s largest fund house, believes the equity markets are over-valued even as the corporate earnings are fast catching up to justify the high valuation.
R Srinivasan, Chief Investment Officer (Equity), SBI Funds Management, said the Nifty index had delivered negative returns of 0.6 per cent last fiscal against 19 per cent in the previous fiscal.
Though value has come back after a long period of underperformance, this year will be of consolidation in equity markets, he said at the launch of SBI Funds’ Periscope Yearbook FY23-24 here on Tuesday.
Neutral outlook
The fund house has given a ‘neutral’ outlook on large-cap and mid- and small-cap sectors. Large-caps have reversed their underperformance to mid- and small caps, and directionally there are no substantial argument in favour or against large-caps, he said.
Also read: SBI Mutual Fund taps 27% growth in SIP registration last fiscal
Mid- and small-caps have had sharp swings in performance, settling down to a neutral zone. “We continue to favour a bottom-up strategy, focusing on long-term earnings compounders. Multi-baggers will continue to emerge from this space,” he said.
On sharp rise in investment by foreign investors, he said India is the bright spot compared to other emerging markets and moreover they are keeping away from two large economies of Russia and China for various reasons.
Foreign fund
With the rise in foreign fund flow and steady equity inflows through mutual funds, it has become a case of too much money chasing limited number of stocks, he added.
Ruchit Mehta, Head of Research, SBI Funds Management, said government focus on infrastructure projects and global demand will create higher demand for resources, leading to fresh capacity addition.
After a decade of pain, the banking system is in a good shape and in a position to cater to loan demand for long-term projects. This along with higher lending rates will lead to improved profitability for the banking sector, he said.
Affluent and middle-class households are expected to grow at a compounded annual growth rate of 9.6 per cent till 2030 and this along with low penetration of most consumption items will aid growth in consumption.
“We believe infrastructure, banking and financial services, and discretionary consumption should play well as a theme in the long run,” said Mehta.
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