‘Markets have limited downside and much higher upside’

The Indian stock market has gone through a tough phase for almost two years now. However, Raamdeo Agrawal, chairman and co-founder of Motilal Oswal Financial Services, believes that after going through a perfect storm, things are likely to change sooner rather than later.

- Kushan Shah and Joydeep Ghosh

He tells Kushan Shah and Joydeep Ghosh that a sustained growth rate of 7.5%-8% is the only way to ensure that foreign portfolio investors (FPIs) make a comeback. Excerpts:

How are you looking at the stock market currently?

The market has gone through one of its longest corrections in the past two years. While the indices have not fallen sharply, they have remained range-bound, with valuations staying elevated because of earnings growth. A combination of delayed monsoon, outflows from FPIs, and volatility in commodities and crude oil put pressure on the currency. Despite these challenges, the market has held up much better than in previous cycles.

I believe the Indian economy has become more resilient, and that has made the markets more resilient as well. Retail savings have increasingly moved into equities. The number of demat accounts has risen from 40 million to 240 million since 2020. Monthly inflows of around ₹30,000 crore through systematic investment plans (SIPs) have ensured that the markets have not collapsed.

Some are advocating that the government should take steps to slow down SIPs as it is helping FPIs get exits at higher prices. Also, it is not allowing the market to fall meaningfully. What are your views?

It is not possible for policymakers to take a sharp turn when both the economy and the markets are under stress. I believe the current pressures will ease. We could see oil near $60 a barrel and gold around $3,000 in the near future.