The Indian economy looks to be on a strong footing primarily on the back of the government spending, said Punita Kumar Sinha, Managing Partner, Pacific Paradigm Advisors.
She believes global liquidity is plentiful and that has been flowing little bit out of the US into emerging markets (EMs) and that trend is likely to continue. This would, in turn, keep the rally going.
“If you look at what the markets have done over 12 months, they are still up about 20-25 percent across most stocks but over the last three-six months there has been a sharp rally. There could be some correction in the normal course of things but I think there is still more upside over the next several months,” she said.
However, Sinha added that she is worried about inflation.
“I do worry longer-term about inflation and interest rates going up because the demographics of India is such that even if the government pushes on the supply side, the demand side will inevitably pick up and we could end up with inflation because a supply is never enough to keep up with the demands of our large demographic pool of people. At the moment we are okay, if you look at one-two years ahead, there could be some concerns on that front,” she said in an interview with CNBC-TV18.
In terms of earnings, she said, “I don’t think the risk is so much earnings. The earnings will keep pace, will improve and so far have been pretty decent, so that is not the big risk in my view but valuation is a bigger risk than earnings.”
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(Edited by : Pranati Deva)