India is not a dirt cheap market but froth is lower than 2024, says S Naren of ICICI Pru AMC

No room for big bets: S Naren says markets aren’t dirt cheap

• Nifty fell 4 percent in January, raising doubts about near-term market sentiment
• Valuation comfort remains limited despite recent corrections, says S Naren
• Moderate returns expected as Indian markets are not attractively priced.

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After a lacklustre market phase through 2025, expectations were high that 2026 would mark a clear turnaround. However, January has once again disappointed, with Nifty declining by 4 percent raising questions on whether sentiment can meaningfully improve in the near term. In an exclusive conversation with S Naren, executive director at ICICI Prudential AMC told Moneycontrol that despite the recent correction, valuation comfort continues to remain limited in the market.

According to Naren, a key issue lies in investor expectations rather than headline returns. “Unfortunately, what has happened is people in India always expect 10 to 15 percent returns all the time. And due to that, what has happened is valuations have become extended and we are forced to talk of asset allocation all the time,” he said.

Despite recent corrections and bouts of volatility, Naren said that he does not see the Indian market as attractively priced.

“The reality is there are very few stocks which are available at sub 15 trailing PE even today. Except a few maybe banks and a few sectors in oil and gas and coal and all those kind of sectors,” he said. “So I would say, you know, Indian market is not dirt cheap at this point of time.”

This assessment comes at a time when global markets are also grappling with elevated valuations. With US equities, especially the Nasdaq, having delivered outsized returns in recent years, and Asian peers like Korea and Taiwan seeing sharp moves, relative value has become harder to find across geographies. “The only difference between 2024 end and now is that all markets in the world are not cheap.”

However, he agreed that excesses and pockets of froth seen in the markets earlier have eased. “The froth is much lower, the froth is still there, but it is much lower than what it was in 2024,” he said, adding that the level of froth is different from a level of cheapness, drawing a clear distinction between reduced froth and genuine value

In such an environment, Naren argued that investors managing public money must prepare for a phase of moderate returns rather than outsized gains.

“When people ask me moderate returns, we don't give a number because the moment we give a number, people will feel too comfortable because as it is people believe equity is risk-free,” he said. “So the point is that we don't mention the moderate return so that let them think what is moderate return and if later it turns out to be a low number, we tell you it is moderate return.”