Why Motilal's Prateek Agarwal thinks equities can still beat other asset classes

Prateek Agrawal, Executive Director at Motilal Oswal Asset Management Company, believes that despite the sharp run-up, equities continue to remain competitive when compared with alternative asset classes.

"If somebody has to put in money and seeks, let's say double-digit kind of returns, and if you can digest volatility, I think equities are the place to be in still, on the larger cap indices. I think most commentators are saying valuations are sustainable, and we are saying the same. This means you should expect earnings growth kind of returns from the large cap part of the market," Agrawal said in a conversation with CNBC-TV18.

However, he said, investors should be aware that the easy money made in the market post-COVID lows is behind us.

Agrawal also shared some sectoral views. He highlighted a significant challenge in the auto segment for long-term investors. He said, “The challenge here is for a long-term investor whether the market is giving valuations to both internal combustion engine (ICE) and electric vehicle (EV) part of the business. At some point, you will not have both; you will have one of the two, so that becomes a challenge.”

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He also pointed out that the auto sector has been the leader in terms of earnings growth over the last few quarters and the stock prices have followed. In the near term too, this momentum in earnings growth will continue, and market performance is also likely to sustain.

The Nifty Auto Index has gained more than 50% over the past year. The index ended nearly 1.5% higher on February 6 at 19,904.

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