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Markets in higher risk zone due to expensive valuations, says Amit Dalal of Tata Investment

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Amit Dalal, executive director of Tata Investment Corporation, spoke to CNBC-TV18 about the current trends in stocks market and outlook.

Amit Dalal, executive director of Tata Investment Corporation, spoke to CNBC-TV18 about the current trends in stocks market and outlook.
“Technically I think the market is full of confidence. Allocations to equities remain high domestically at least. In India, there is more and more confidence that you have to perhaps remain invested in equities over a long-term and therefore, we don’t see any fall in systematic investment plans (SIPs) and also the insurance companies are becoming larger and therefore their allocations to equities remains high,” he said.
“Globally there are mixed views and mixed trends which are coming from various paths. Interest rates are rising and therefore there are cues that perhaps one should reduce allocation but still equity markets in United States keep ruling on an upward trend. So I think the global markets are perhaps more mixed in their approach to equity allocations but in India, I think equity allocations remain on a positive note,” Dalal added.
“In terms of the money flow, when it becomes less, you see narrower market. So since April, there has been a very narrow outpeformance of stocks within the indices and a larger secular consolidation taking place and that is why the midcaps and smallcaps had gone down and of course there were some regulatory issues which led to those sell-offs also," said Dalal.
With regards to the market valuation, Dalal said, "I do think that the markets are very expensively priced right now and therefore correction should come forth given both the fact that we are going into an election season in the next quarter and perhaps you will see two rate hikes coming from United States by December of this year as promised by the Fed. Given that background and the fact that we have a market which is almost 25 times earnings, I do think we are in a higher risk zone than one would like to be."