Not in a bubble zone yet but valuations high: Mirae Asset’s Gaurav Misra

The relentless march of Indian stock markets over the past few months that has pushed benchmark indexes to record highs is raising concerns of overheating among a section of analysts, asset managers and investors.
But Gaurav Misra, co-head of equity at Mirae Asset Mutual Fund, feels Indian stock markets are not in a bubble zone yet even though valuations have crossed long-period averages.

Misra, who manages Mirae Asset’s focused fund and co-manages its popular large cap fund, says corporate balance sheets are healthier than before, the earnings outlook is strong and macroeconomic indicators are relatively stable.
He adds that while it is difficult to predict market movements in the short term, stocks will give superior returns than most other alternative avenues over the long term.

In the short term, Indian markets could be volatile or time correct, he said in an interview with Moneycontrol. A possible third wave of Covid-19 and any subsequent lockdowns could be a big overhang, he added

Misra says the Nifty has been among the better-performing markets worldwide this year, and the best among emerging markets. It is trading at a premium to most developed markets as well, except the US, and is also at a premium to its own historical averages. 

Globally, there is doubt of the impact of loose monetary policies on inflation. However, the Quantitative Easing policies after the 2008 global financial crisis hadn’t resulted in any untoward surge in inflation.
On the flip side, some major economies have higher levels of debt than a decade ago and there can be unintended consequences, he cautions.
On small and midcaps

Responding to a query on whether small and midcap stocks are overheating after jumping three-four times over the past year, Misra says many midcap and small companies will growth for the next few years.

“I do not think there is an overall case for or against any market capitalisation. The returns from here on will be driven by stock selection irrespective of market capitalisation,” he says.
He suggests that investors should pick the categories depending on their own risk considerations. But he advises against a large weight in smallcap stocks as more businesses in this category are vulnerable during a slowdown.
On IPO frenzy

According to Misra, the number of IPOs in India have been higher in six years over the past decade than in 2021.
However, 2021 is ranked second in terms of the amount of money raised via IPOs. And if the IPO pipeline is indication, 2021 will be the best year in a decade in terms of the quantum of money raised.
This highlights strong liquidity in the market, interest in new-age businesses and sectors, early investors taking profits, and a robust outlook for Indian corporate houses, he says.