Delivering 4% alpha and still lagging peers?

Summary: Tata Mutual Fund’s senior fund manager explains why valuations aren’t stretched, how earnings are quietly turning, and where the next big opportunities may emerge. After a turbulent year that saw sharp corrections and shifting sentiment, the markets seem to be finding their footing again. But Sonam Udasi, Senior Fund Manager at Tata Mutual Fund, isn’t reading this rebound as irrational exuberance. Overseeing five funds worth around Rs 15,400 crore, Udasi believes valuations are only slightly above long-term averages and that improving earnings are providing real support. As the manager of the Tata Value Fund, he has stayed disciplined even as growth-hungry peers chased momentum. In this interview, Udasi discusses why India’s market recovery is still grounded in fundamentals, how value and growth can coexist and where he sees the next big pockets of opportunity emerging. Markets have staged quite a comeback since the mid-year correction, though they’re still shy of earlier peaks. Do you see this rebound as the start of a durable phase, or are we once again in a zone where valuations have raced ahead of earnings? If we step back a bit, from October last year to February, we had a massive correction. Valuations corrected, and foreign institutional investors (FIIs) pulled out in a big way. Then policymakers did a 360-degree turn to tackle this. We saw liquidity improving, taxation reprieve, and the focus on growth was back. So, all policymakers, whether government or monetary, were on the same page that we need growth back. That’s where market sentiment started to improve a little. Even as we speak today, valuations of both the Nifty and Nifty 500 are about 5-6 per cent above their long-term 10-year average, on both a trailing and a forward basis. So, it’s not as if we are super expensive or in a bubble. There are always pockets that are overzealous and others where nobody wants to touch. I wouldn’t say we are a very expensive market, but neither are we cheap. Wh