Indian equities could hit new highs next year: Aditya Birla MF

Mumbai: Aditya Birla Sun Life Mutual Fund expects Indian equities to scale fresh highs over the next year, betting that stronger earnings growth, a more stable rupee and a continuing pipeline of new listings will outweigh concerns around elevated valuations.

However, the fund house cautioned that gains are likely to be more measured than in previous rallies.

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"Elevated valuations are likely to keep the markets advancing gradually and make stock selection important," said Harish Krishnan, chief investment officer for equities at Aditya Birla Sun Life Mutual Fund. Three factors underpin the asset manager's outlook: healthy nominal GDP growth, lower currency-related headwinds and a revival in capital expenditure.

The fund house said the profit pool of the top 1,000 listed companies has expanded 18% YoY over the past 21 months, even as overall market capitalisation has remained largely flat, creating room for further upside.

Krishnan said India's 3.04% share of global market capitalisation remains attractive, while an analysis of the Nifty 500 index in gold terms suggests equities have become relatively more compelling than the precious metal.