Veteran fund manager Prashant Jain has expressed hope of a rise in the market after 15 months of consolidation. Jain, Founder of 3P Investment Managers, told many important things about stock markets and investments in N Mahalakshmi’s podcast before Diwali. He said that this kind of ‘time correction’ is good. This usually happens before a sustained market rally.
Market ready for breakout
Prashant Jain Said, “Eventually the market will break out and go up. It has been observed that in a growth environment, after a long period of consolidation or time correction, the market will break out and go up.” He said that after the Covid pandemic, the market had gone beyond its fundamentals. There were many reasons for this. These included ultra-low profitability, rapid earnings recovery and a large number of new investors.
The market had gone beyond fundamentals
He said that after Covid the earnings base was very low. The ratio between profit and GDP was also very low. Along with this, a large number of new investors had entered the market. All these together pushed the market beyond its fundamentals. Now that period of extreme enthusiasm is over. This correction of about a year is very good. This has again created balance in the market. The boom in valuations of large caps is now over.
Market has come down from high valuation
In a recent note sent to investors, Prashant Jain has said that the markets are also trading at 20 times the earnings estimates for FY27 and 18 times the earnings estimates for FY28. This is slightly higher than the historical average of about 18 times. Still it’s okay. He believes that the cost of capital for both domestic and foreign investors in India is low, in view of which this valuation cannot be called high.
Local investment has taken over the market
He wrote in the note that continuous and large local investment in the stock market has reduced the volatility. The difference in tax rules on income from equity and debt has also increased the attractiveness of shares. In the 15 months of correction, FIIs have sold a net amount of $ 18 billion. Ownership of FIIs is decreasing in Indian markets. Currently they are underweight regarding the Indian market, whereas earlier they were mostly overweight. He said that the market is holding steady even amid the selling of foreign funds. This is a sign of increasing domestic strength.
Sensex has increased 800 times in 46 years
Jain said that market returns should remain positive in the next one year. Increasing activity in the primary market has provided stability. After lagging for some time, the pace of capital raising is again gaining momentum. This pipeline is large and will continue to grow. However, he said investors need to keep their expectations under control. The performance of most issues may remain weak in the long run. He said that India’s growth story has not been affected in any way. We know that Sensex has increased 800 times in the last 46 years.