‘Next leg of growth from FMCG, consumer discretionary firms’

India’s market valuations were at a 100% premium to emerging markets in September last year, making it an expensive proposition.

- Srushti Vaidya [e-mail]

Now that the valuations have come back to a 60% premium, we may see foreign institutional investors (FIIs) coming back, said Vipul Bhowar, senior director, head of equities at Mumbai-based wealth management company Waterfield Advisors.

Talking about promoters diluting stakes at a high valuation, Bhowar said that in itself is not a problem as they should be rewarded for their hardships. It becomes a problem only when the promoter is moving out of the company and not having a control in the company after dilution, he said.

Edited excerpts from an interview:

The market will trend higher from here on. From March onwards, the government has done things to improve consumption, starting with income tax cut, RBI rate cut, GST cut, and we might also see the Eighth Pay Commission (revisions) from January onwards. Smartly, the government has lowered speculation in derivatives and also banned real money games. So, now whatever capex was done for the last few years should end up getting consumed. Hence, markets will do well from here on.

We expect a 10-12% return in Nifty 50 in the next one year, not as high as the last few years, Just that companies and sectors which did well in the capex run over the last few years might not do well. The next leg of growth will come from FMCG, consumer discretionary, building material companies, and others. There is a case for returns higher than 12% but it depends on (how) the global economy pans out. I have a contra view that the AI (artificial intelligence) fallout might be positive for India.