Given the fact that the valuations remain attractive, investors should not lose the opportunity and remain invested, Agrawal said.
NEW DELHI: The domestic equity market is trading at attractive valuations at current level. The much-awaited recovery in India's growth is around the corner, which will put the market in a much better footing compared with most other markets over the next five years, Raamdeo Agrawal, Joint MD, Motilal Oswal Financial Services, said in an interview with ET Now.
One reason for the outperformance could be the fact that the government is working very hard to put things back on track for the economy as well as for corporate India.
"The government is working very hard on all departments. The Prime Minister is working very hard. Earlier the expectations were running very high. The good thing is that expectations have kind of subsided now and there is no so-called Modi effect in the valuations," Agrawal said.
"Everybody is now grounded and things cannot go worse from here on. So, expectations can only go up. But it will take some time," he said. "Whenever corporate earnings rebound and the investment cycle finally picks up, we are going to see some spectacular show in the yearly performance," explained Agrawal.
The S&P BSE Sensex is already up 100 times in the last 30 years when the Sensex was trading at 271 level in 1984. Given the fact that the valuations remain attractive, investors should not lose the opportunity and remain invested, Agrawal said.
"The market has been flat in last one year. But since corporate earnings are flat, it seems the market is unlikely to make any significant upward move. That said, the economy is about to turn around may be 6-8 months down the line," Agrawal said.
"The market will be the first to know that the economy is finally turning around. That will be reflected in the NSE benchmark, which may scale the 9,000 level," he said.
He further said stocks are different from the market. In the last 20 years, Infosys is up 6,000 times, but the market is up only five times. The Indian market is up 100 times in last 30 years. But, global markets are not up 100 times.
"We have to acknowledge that India has a distinct story for the longer run. I believe India will move far ahead of most of the markets in the world," Agrawal said.
The current valuations – if we look at only in terms of PE multiples – look stretched. A part of the reason could be corporate profits, which are quite depressed because of high interest rates and a low economic growth rate.
"But, if we look at the broader valuation ratios such as market cap to GDP, we have a very reasonable valuation of less than 70 per cent. At its peak, just for the record, the number went to 1.8 times GDP," Agrawal said.
He is of the view that the downside looks limited for the broader market and if an investor enters the market, a significant upside is likely on a five-year basis.
Can it be three times? "Yes, I think so. Clearly, we are at a very interesting juncture and we are very excited about what is going to happen in next six to eight months," Agrawal said.