According to Love, emerging markets such as Mexico, Brazil, Turkey and Russia currently appear cheap
Investment manager Tim Love, who oversees $1 billion of emerging market equities, plans to pause buying of Indian stocks due to their expensive valuations.
Love, an investment director at GAM Holding, told news agency Bloomberg he intends to wait 12 to 18 months to assess the earnings growth of companies.
"India is a growth play generally and it's a brilliant one, but it's expensive as heck" Love told the news agency.
According to Love, emerging markets such as Mexico, Brazil, Turkey and Russia currently appear cheap.
"A dip in stock prices due to geopolitical tensions will be an opportunity to enter and add some Indian stocks," he said.
Massive social spending by the new government and its impact on India’s fiscal account is a major risk after the election, Love added.
An MSCI index of Indian equities is currently trading at a 53 percent premium to its emerging market rivals, and 19 percent higher than global equities.
About 7.4 percent of the $953 million of assets managed by GAM Multistock Emerging Markets Equity fund was in Indian equities as of January 31, 2019, as per Bloomberg data. Love plans to increase this share to as much as 20 percent over the next 18 months if valuations decline.
Once the valuation seems right to Love, he plans to raise his stakes in stocks such as Maruti Suzuki India, Mahindra & Mahindra and Reliance Industries, and several mid-sized firms such as KEC International.
At the moment, Love's holdings in India are scattered across banks, financial services companies, and software companies, including HDFC Bank, Axis Bank, ICICI Bank, L&T Finance Holdings, SBI, Infosys, TCS and HCL Technologies.
"India has a consistent democracy, relatively stable politics and yes there should be a premium; but the valuations are pushing 18 times P/E, too high and more expensive than the S&P," the investment manager told Bloomberg.
India's relative non-correlation with global trends is a factor that works in its favour, according to him.
A widening tax base and stable oil prices could provide a cushion against risks to the country's fiscal deficit, Love added.Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.