India among only a few with over 6% GDP projection: Pratik Gupta of Kotak

Indian economy

India looks attractive from top down, believes Kotak Institutional Equities CEO Pratik Gupta, as it ranks among a few markets in the world with the economic growth estimated at over 6 percent for the next 10-15 years.

The macro outlook for the country looks good, despite a surge in retail inflation, he said. "The spike in inflation is temporary and will come down."

Gupta, however, pointed out that the valuations were quite high. “The Nifty is trading at 21x FY24 P/E, and about 18x FY25 for earnings growth of 15 percent and if you look at India’s premium versus the MSCI EM index, we are now at a premium of about 60 percent,” he said.

The market is likely to undergo a consolidation phase in the short term and if there is a correction, it will be around 3 to 5 percent range, he said, maintaining that the market looks attractive from a long-term perspective.

EV sector

Gupta said he is looking at the incumbents in the EV two-wheeler space. He added that these companies also need to watch out for disruption in technology. “We think there will be opportunities for auto ancillaries involved with the EV space,” he said.

He cautioned that there will be a couple of quarters with indifferent earnings as demand looks sluggish.

IT

According to Gupta, IT companies focused on the BFSI and telecom space would suffer earnings downgrades in the coming quarter because of a slowdown in discretionary spending. He advised to look out for large-cap companies as they have better chances of weathering the spending downturn. “Large-cap IT names are less vulnerable to a slowdown and discretionary spending versus the mid-cap where the client concentration risk is a lot higher with the service lines not as diverse as in the large-caps.”

He asked to look out for small corrections that he expects in the next few months and enter into large-cap companies.

Promoter selling

Gupta said that selling by promoters or PE firms should not be taken as an alarm as stocks have done well after promoter exits. “There have been numerous instances over the last five-ten years where promoters or PEs have sold out and the stocks have gone on to do really well. A lot of IPOs which have come out in the last two-three years were mainly PE exits and some of them have done quite well,” he said.

Gupta sees a lot of paper supply hitting the market as the earnings season gets over and the lock-in period for investors in some of the IPOs are coming to an end. Global investors looking for stock-specific deals at a discount will counter the selling through block deals, he said.