'There is no alternative' factor benefiting India but valuations uncomfortable: Jefferies

The Indian market is outperforming its global peers. Europe is a sea of red and the Asian markets too are under pressure with only Shanghai closing in the green apart from the Indian benchmarks Nifty50 and BSE Sensex on September 5.

Inflows from foreign players have increased in recent weeks with August seeing a turnaround where foreign institutional investors emerged as net buyers of Indian shares after a gap of 10 months.

According to Jefferies’ India Strategist Mahesh Nandurkar, India is benefitting from the ‘there is no alternative’ factor currently.

"Many other large emerging markets are not finding positive flows from the international investors and we are seeing that after a long gap of 8-9 months where we consistently saw about USD 4-5 billion a month of net selling,” he said.

However, the Jeffries analyst cautions against taking things for granted. According to him, momentum is in favour of India, but valuations are uncomfortable.

“From a momentum perspective, things are in favour of Indian markets, but valuations are becoming more uncomfortable especially, in the context of US; also we have outperformed quite a lot, S&P is down almost about 15 percent year to date, our markets are just about flat,” Nandurkar said.

Talking about investment options, Nandurkar said that selective picks in capital goods are the right strategy in this market.

“In the latest quarterly result (Q2FY23) season, some of the capital goods companies stood out as very few exceptions where we saw earnings upgrades, while most of the other segments of the market saw downgrades. So, selective picks in the capital goods sector are still the right strategy in my view,” Nandurkar reasoned.