Indian Equities Offer Reasonable Valuations at 16x FY28 Earnings: Kotak Neo

Indian equities continue to present attractive investment opportunities despite ongoing market volatility, according to Shrikant Chouhan, Head of Equity Research at Kotak Neo. Speaking on market conditions, Chouhan stated that Indian equities are trading at reasonable levels and have already factored in several existing economic challenges.

Highlighting earnings multiples, Chouhan pointed out that the market is currently trading at 16 times FY28 earnings. He noted that this presents a reasonable entry point for investors looking to allocate capital into quality stocks.

Analyzing market levels, Chouhan stated that the Nifty has historically attracted buying interest near the 22,000 mark. However, he cautioned that ongoing selling pressure in mid-cap and small-cap segments could push the index down temporarily to the 21,750-21,800 range. He added that such a decline is unlikely to be prolonged unless crude oil prices climb above USD 120 per barrel.

Regarding currency performance, Chouhan stated that measures implemented by the Reserve Bank of India (RBI) and the government have successfully limited the depreciation of the rupee. Support from policy reforms and major initial public offering (IPO) inflows have helped stabilize the currency from the 96-97 range back to 94-94.50. He observed that foreign institutional investor (FII) outflows have persisted but slowed down over the preceding 10 to 12 days.

On global factors, Chouhan highlighted the decline in US bond yields from 5.30% to 4.95% as a positive indicator for financial markets. He also noted that potential shifts in global investment flows toward emerging markets could occur as technology-heavy indices such as the Nasdaq and Kospi encounter selling pressure. Furthermore, he mentioned that crude oil prices remain a critical variable, and a cooling of tensions or positive dialogue between the US and Iran could drive a sharp upward move in the market.

Sustained foreign outflows over the past two years have contributed to attractive valuations across several Indian stocks. While the broader market has corrected by approximately 10% to 15%, select individual stocks have seen pullbacks of 30% to 35%. Chouhan advised investors to accumulate quality stocks at current levels rather than wait for a sudden market rally.

In terms of sector outlooks, Kotak Neo maintains a positive stance on mid-sized IT companies, private banks, and hospitality and tourism stocks. Conversely, the firm expects the auto sector to remain under pressure due to rising crude oil prices and limited earnings growth. Additional caution was raised regarding pharmaceutical stocks nearing peak valuations after sharp gains over the previous six months, as well as hospital stocks facing increased regulatory intervention.

"Market corrections and valuation adjustments are a normal part of economic cycles. When broader indices and select quality stocks experience pullbacks alongside sustained foreign institutional adjustments, it presents a pragmatic opportunity for long-term investors to focus on fundamentals. At a forward earnings multiple of 16 times FY28, the market reflects a balanced pricing of current risks, provided external variables like crude oil prices and currency movements remain stable. Investors should maintain a disciplined approach by accumulating fundamentally sound assets rather than attempting to time short-term volatility." — Dr. Shishir Gupta, Founder & CEO, StartupLanes