'Valuations already elevated, so large multiple expansion hard to justify'

Simultaneous fiscal and monetary tightening hurt growth and earnings, but momentum is returning, says Axis Bank's Neelkanth Mishra, signalling a possible market turnaround

Simultaneous fiscal and monetary tightening created a drag on the economy and markets, says Neelkanth Mishra, chief economist, Axis Bank and head of Global Research, Axis Capital. In an interview with Subrata Panda & Samie Modak, Mishra says as growth momentum becomes clearer, foreign investors, who went underweight India, may return. Edited excerpts:

 

Why did Indian equity markets underperform global peers this year?

 

FY25 saw simultaneous fiscal and monetary tightening. Fiscal tightening amounted to about 130 basis points — 80 explicit and 50 implicit — while credit growth slowed sharply, together creating a drag of nearly 2 percentage points of