Further valuation expansion unlikely: BofA Securities' Amish Shah

Broader markets represented by small and midcap stocks are trading at even higher valuations or close to two standard deviations over long-term averages, Shah said

The markets are trading above their long-term averages and further expansion in valuation is unlikely, says Amish Shah, Head of India Research, BofA Securities. In an interview with Samie Modak in Mumbai, Shah says recovery in GDP, capex, and consumption revival could fall short of consensus expectations. Edited excerpts:

 

The markets are now less than 3 per cent away from fresh record highs. What has underpinned the latest rebound in equities?

 

We believe this rally has been underpinned by four key positives. These are the recent cuts in policy rates as well as the cash ratio reserve (CRR) by the