Indian equity markets are on the upswing and worst of the economic indicators like gross domestic product (GDP), fiscal deficit and current account deficit (CAD) is behind us. At 'Cafemutual Confluence' most industry participants of mutual fund houses are of the opinion that the Indian growth story is all set for revival and Sensex would reach near 45,000-50,000 in next three years.
S. Naganath, President and CIO at DSP BlackRock Mutual Fund said, "Our view is that economy has bottomed out and we might see big improvement in GDP numbers from fiscal 2016 and 2017. Because of the revival in the investment cycle and we expect growth rate to reach 7 percent mark. Concurrent with the 7 percent GDP growth we believe that, corporate earnings will improve from current 14-15 percent growth to nearly 20 percent in fiscal 2016 and 2017."
The Indian equity markets have seen sustained flows from foreign institutional investors in the past one year, especially on the equity side and experts believe that there is no reason why Indian equity can't attract huge flows among other emerging markets. "Within BRICS countries there is considerably interest in India because it is likely to show higher growth. Our market offers them different choices in terms of stocks and sectors and also in terms of market capitalization (we have some good small and midcap companies)." Mr Naganath also believes that given the scenario, there is high probability of Sensex touching 45,000-50,000 mark in the next three years.
But given the sharp rally in the Indian equity market in the last few months, fund managers say that valuations are still near the ten-year average and have not entered bubble range. S Naren, CIO at ICICI Prudential Mutual Fund says, "In terms of valuations, I think we are still far away from bubble in equity. People are still underinvested in equity and I believe that valuations are very far away from peak." Naren goes on to add that the debt markets were at an extremely attractive position at this point of time. "I must tell you that debt looks like an extraordinary asset class at this point of time. Flows are not coming in and debt markets are at exceptionally attractive valuations. In our view we are in a once in twelve year attractive position in fixed income," concluded Naren.
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