In this State of the Economy Podcast, bl.portfolio editor Parvatha Vardhini C, talks to Varun Saboo, Head of Equities at Anand Rathi Shares and Stock Brokers, on the post-election market dynamics and where the opportunities lie now. He explains that the severe market reaction post-election was driven by unmet expectations of a higher seat count. However, he reassures that the market’s fundamentals remain strong due to the continuity of the government, noting, “This is a government which is coming third time in a row, right? I have not seen this happening in many countries, especially among the larger nations”. He likens continuity in government to continuity in company management, which fosters a stable environment for growth.

Regarding market valuations, Varun offers a contrarian view, suggesting that Indian markets are not expensive but rather fairly valued given the robust growth potential. He points out that the market’s liquidity, fuelled by substantial mutual fund inflows and inflows from other avenues such as PF and insurance, supports the current valuations. He also argues that India’s growth story justifies higher multiples, dismissing the notion of overvaluation. “The important part in the valuation matrix is the growth, be it revenue or the earnings, right? I don’t think most countries in the world right now has the kind of growth we have,” Varun states.

Varun identifies IT and banking sectors as particularly attractive for investors. He notes the underperformance of the IT sector over the past two years, making it a promising area for investment due to its strong fundamentals and future growth prospects. Varun also acknowledges that while some sectors, like four-wheelers and capital goods, have seen sharp rallies, they might experience a time correction rather than a severe drop. He believes these sectors will eventually align with their earnings growth over time.

Varun observes a slight shift in interest towards consumer and FMCG sectors post the elections. Saboo expresses optimism about the market continuing to climb up, driven by strong liquidity and a stable economic environment. “You look at the number of issuances which are coming up, the amount of promoters selling their some stake….that’s why, despite the kind of selling by FIIs, markets are not stopping because this is getting absorbed.”

Listen in!

(Host: Parvatha Vardhini C; Producers: Rowan Barnett, Siddharth Mathew Cherian)

 About the State of the Economy podcast

India’s economy has been hailed as a bright spot amid the general gloom that seems to have enveloped the rest of the world. But several sectors continue to stutter even as others seem set to fire on all cylinders. To help you make sense of the bundle of contradictions that the country is, businessline brings you podcasts with experts ranging from finance and marketing to technology and start-ups.