Emerging sectors offer growth opportunities beyond index levels

Prateek Agrawal, MD & CEO, Motilal Oswal Asset Management Company, believes valuations of large-cap stocks are at neutral levels, implying that future returns are likely to align with earnings growth.

- Prateek Agrawal, MD & CEO, Motilal Oswal Asset Management Company,

Prateek Agrawal, MD & CEO, Motilal Oswal Asset Management Company, believes valuations of large-cap stocks are at neutral levels, implying that future returns are likely to align with earnings growth. Agrawal tells Nesil Staney Nifty returns over the next two years are likely to be driven by earnings growth, adding that the expected lower cost of capital could potentially support some valuation expansion. Excerpts:

How do you view current large-cap valuations?

Valuations are presently at neutral levels, implying that future returns are likely to align with earnings growth. We continue to believe that markets follow earnings over time. In this context, identifying companies with strong and consistent earnings is crucial. In a fairly valued market, selectivity and discipline are likely to be key factors in aiming for better long-term outcomes.

What's your view on the Nifty over the next two years?

We believe Nifty returns over the next two years are likely to be driven by earnings growth. With valuations at fair levels and interest rates expected to decline, the cost of capital could reduce, potentially supporting some valuation expansion and aiding market performance.