Sanjeev Prasad feels overseas investors find India market valuations expensive

Expensive valuations could be the key reason for foreign investors dumping Indian equities at least in the secondary markets for the past few months, says Sanjeev Prasad, Co-Head, Kotak Institutional Equities in an interview with CNBC-TV18.

“Overseas investors are circumspect about valuations and opportunities elsewhere. India really does not benefit from the global economic recovery. It looks like FPIs are focused on far-east Asia and also technology stocks in China are doing very well,” he said.

Foreign investors have pulled out more than Rs 4,000 crore from the country's stock markets this month so far in the month of December. However, such investors had put in over Rs 2,200 crore in the debt markets during the period under review.

Commenting on the earnings, Prasad said current valuations partly discount strong earnings recovery. We expect 23 percent growth in Nifty earnings in FY19, and 17 percent in FY20.

The Nifty50 trades at 17.4x FY19. “This time around we are more confident of an earnings recovery in select sectors in FY19,” he said.

The market would look more expensive if the earnings numbers fail to come through for whatever reason. “Having said that, I feel slightly more confident for earnings to come back because lot of negative factors across sectors have played out,” said Prasad.

We keep our fingers crossed as this market requires earnings growth in the backdrop of worsening the macro economic situation as far as India is concerned, he said. For stock market to generate positive returns, this market requires earnings growth.