Nifty is fairly valued at about 16 times one-year forward: Prabodh Agrawal, Head of Research, IIFL Institutional Equities

In a chat with ET Now, Prabodh Agrawal, Head of Research, IIFL Institutional Equities, shares his views on the markets.

ET Now: Nifty in this calendar year has appreciated by about 20 per cent. Do you think bulk of the Nifty appreciation or bulk of the Nifty adjustment for this calendar year is over?

Prabodh Agrawal: No, I do not think that the Nifty in other words is overvalued. I would think that while we have seen a 20 per cent rise, if I take over a slightly over longer period say since the beginning of 2013 in the last 18 months, the Nifty is up some 16 per cent in dollar terms. Many other markets regionally as well as globally have done much better. So India does not rank among the top of oil markets globally in the last 18 months. I would think that of course the Nifty valuations do not look cheap.

But I do not think they are expensive either. It is fairly valued at about 16 times one year forward, 2.5 times price to book at a market cap to GDP ratio of around 75 per cent which is close to the 10-year average. But a further upside would be driven by earnings upgrade. Now the earnings upgrade may not be imminent. They may happen towards the later part of FY15 or more likely in FY16. But as we get more visibility of higher earnings growth in FY16 and beyond that is what will keep the markets going up.