Nifty at 20.5x earnings; Pradeep Gupta says smallcaps carry valuation risk despite moderate largecap levels

Pradeep Gupta, Chairman and Managing Director of Anand Rathi Share and Stock Brokers Limited, stated that Indian equities do not command an excessive premium over other emerging markets. He noted the Nifty 50 trades at approximately 20.5 times earnings, a level nearly 12% below its ten-year average. Gupta explained that the current market environment features accelerating corporate earnings and more upgrades than downgrades. Despite this moderate valuation in the broad index, he identified a clear divergence across different stock categories. Mid- and small-cap stocks are trading at significant premiums to large-cap shares while pricing in sustained high growth. In an interaction regarding sector specific valuations, Gupta highlighted that domestic institutional flows show growing resilience even amidst foreign investment fund selling. He suggested that current comfort levels exist more for large-cap equities than for segments representing smaller market capitalizations.