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market | IST

Nomura downgrades India to neutral, says 77% stocks trading above pre-pandemic multiples

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Chetan Seth, Asia-Pacific equity strategist at Nomura, on Tuesday, said that 77 percent of Indian stocks are trading above their pre-pandemic (COVID-19) multiples. Seth sees better risk-reward in China, which has been a big underperformer and also some tactical opportunities in south-east Asia.

Chetan Seth, Asia-Pacific equity strategist at Nomura, on Tuesday, said that 77 percent of Indian stocks are trading above their pre-pandemic (COVID-19) multiples.
Nomura, a global financial services group, has downgraded Indian equities as it believes valuations are too stretched and a lot of positives are already priced in.
“Valuation is one aspect, but stocks which go into an index like MSCI India, almost 77 percent of the stocks are trading at valuations which are higher than pre-pandemic levels or post-2018 average,” Seth said, in an interview to CNBC-TV18.
“If 77 percent number is compared against other markets, for Asia ex-Japan (AxJ) the number is around 41 percent; for China, it’s around 37 percent. So not only at the index level the valuation appears quite excessive, but even at stock levels, we are struggling to find valuations supporting stocks. Therefore, we need to be a bit more cautious on India and that’s why we decided to downgrade India to neutral within our regional Asia allocation,” he said.
However, said Seth, Nomura is not making a sell call on India. “It’s not a sell call; it’s not to completely sell all equity holding and sit on cash. We run a regional allocation strategy, our investors are global investors. So when we look at India against some other markets, we just find better risk-reward in some other markets and where we see risk-reward right now is essentially China, which has been a big underperformer and we also see some tactical opportunities in south-east Asia, which unlike India is gradually reopening,” said Seth.
For the entire interview, watch the video