India's elevated premium over Asian peers is a bit concerning, says BNP Paribas’s Raychaudhuri

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Indian market trading at elevated premiums over Asian peers is a point of concern, said Asian equity strategist, equity cash for the Asia Pacific, BNP Paribas.

“The kind of premium we’re seeing right now (in Indian market) versus Asian peers is a bit concerning…Indian market could take a breather and we could see some kind of a time correction in the near term,” said Manishi Raychaudhuri in an interview with CNBC-TV18.

However, he continues to remain positive on Indian equities in the long term: “So over the longer term, we are still not budging from our overweight stance on India.”

Indian markets have outperformed most major global peers since August on the back of an improving macroeconomic outlook, sustained buying by foreign portfolio investors, and easing commodity prices.

“We have seen India move back very strongly as far as economic growth is concerned after COVID. We have seen earnings estimates of some core sectors like financials, some private sector banks move up of late,” Raychaudhuri added.

He also mentioned that India has benefited from China's zero-COVID policy and has been a beneficiary of investors drifting away from the Chinese market. China’s zero-COVID policy has dented the country’s economic and consumer demand growth.

In the last few months, various Indian stocks have rallied and even touched fresh 52 week highs. Raychaudhuri believes that there will be more investment opportunities in defence and new energy sectors in India in the longer term.

"Over the longer term, we will obviously find more opportunities in these sectors...At the same time one has to be vigilant about valuations that one pays in these sectors and there has to be careful identification of the winners," he explained.