Key Points
Rana Gupta, MD, Manulife Investment Management, says over the last 10 years, a lot of reforms have happened basically by pivoting the economy from a higher deficit to a much higher savings economy, from more consumption incentives to more investment incentives..
But if a company or sector is not linked to those tailwinds and is still trading at higher PE in this high interest rate environment, then a fair amount of caution will come in...
But broadly the question is whether with the global interest rates going up and Indian stock market trading above 10 years of the average valuation, we should reset the valuation benchmark in the light of higher global interest rates?..
Because of the fiscal spending in US to set up, whether it is Inflation Reduction Act, whether it is CHIPS Act setting up electric vehicles, manufacturing facilities, moving some productions near shore within US or other areas that is also causing a huge demand that is why in the US despite higher interest rate, US current account deficit is still expanding..
So if you are in the emerging market, if the country or the sector or the stock is influenced by US fiscal deficit positively, in that case, it makes sense that those sectors, those stocks are trading at average or even higher valuation...
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