India's growth outlook is one of the best in a long time, said Prashant Jain of HDFC AMC while unveiling the fund house's Yearbook for the current year.
The Executive Director and Chief Investment Officer of the AMC believes that the Indian economy is firing on multiple cylinders due to conducive macro-economic environment and various reforms like Aatmanirbhar Bharat, national monetization pipeline, creation of 'bad bank' and various sector specific measures.
'Markets are fairly valued'
The fund house cited past Nifty50 returns and market cap/GDP data to justify the present valuations.
"Despite the sharp rally in 2020 and 2021, Nifty50 returns over the past 10 years and 15 years are 15.4% and 11.6% CAGR respectively, largely in line with nominal GDP growth. Market cap/GDP is also in line with the past range. Markets are thus fairly valued and the long term returns should be in line with the nominal GDP growth," HDFC MF noted in the Yearbook.
‘Time to lower expectations’
The fund house feels that investors need to moderate their return expectations in 2022. "Markets have played the catch-up with post-covid normalisation and are trading at above average multiplies," the yearbook noted.
"Given the likely normalisation of liquidity and growth, strong past returns, likely increase in capital, etc., one should moderate returns expectations over the near to medium term," it added.
What will drive growth in 2022?
The mutual fund expects growth to be driven by three factors:
- Reopening, easing restrictions and high vaccination coverage
- Higher accumulated savings
- Investments as percentage of GDP to be higher as compared to pre-covid era
Click here to read the yearbook.
