Aditya Birla Sun Life Mutual Fund expects Indian equities to scale fresh highs over the next 12 months, betting that stronger earnings growth, a more stable rupee and a continuing pipeline of new listings will outweigh concerns around elevated valuations. According to The Economic Times, Harish Krishnan, chief investment officer for equities at Aditya Birla Sun Life Mutual Fund, noted that elevated valuations are likely to keep the markets advancing gradually and make stock selection important. The fund house cautioned that gains are likely to be more measured than in previous rallies, emphasizing the need for a methodical approach to stock selection.
The profit pool of India's top 1,000 listed companies has demonstrated strong growth, expanding 18 per cent over the last 21 months, while their market capitalisation has remained broadly flat, according to Aditya Birla Sun Life AMC. As reported by The Economic Times, this performance gap is expected to narrow significantly over the next 18-24 months as earnings continue to improve across the market. The fund house noted that the profit pool of the top 1,000 listed companies has expanded 18% YoY over the past 21 months, even as overall market capitalisation has remained largely flat, creating room for further upside.
Three factors underpin Aditya Birla Sun Life Mutual Fund's optimistic outlook: healthy nominal GDP growth, lower currency-related headwinds and a revival in capital expenditure. As reported by The Economic Times, Krishnan highlighted that India's 3.04% share of global market capitalisation remains attractive, while an analysis of the Nifty 500 index in gold terms suggests equities have become relatively more compelling than the precious metal. The weaker rupee is expected to represent exports, while the number of companies undertaking capital expenditure is gradually increasing, improving earnings valuations across the market.
India currently accounts for around 3 per cent of global market capitalisation share, but Krishnan expects this to rise to 6-8 per cent or even higher over the next 18 months. According to The Economic Times, this projected increase in India's share of the global economy creates scope for further convergence between India's economic weight and its share of global market capitalisation, presenting compelling opportunities for international allocators to view India in a constructive manner. The fund house's positive outlook is bolstered by robust earnings growth and a stable rupee, which are likely to propel market gains despite current elevated valuations.
