ETMarkets Fund Manager Talk: Earnings risk can disrupt stock boom, says Vinit Sambre of DSP Mutual Fund

Following a correction in February and March months, smallcaps bounced back with a bang in April. Isn’t this leg of rally largely led by retail liquidity?
Vinit Sambre: India’s compelling narrative of robust economic growth, fuelled by ongoing reforms and government spending into core areas, has attracted investors eager to be part of this growth trajectory. Even minor corrections prompted by non-fundamental news have become opportunities for investors to enter the market, capitalizing on businesses available at comparatively lower prices than the recent past. The fear of missing out (FOMO) further motivates sidelined investors to seize these dips.

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Offering CollegeCourseWebsiteIndian School of BusinessISB Chief Digital OfficerVisitIIM LucknowChief Executive Officer ProgrammeVisitIIM LucknowChief Operations Officer ProgrammeVisitMoreover, with positive sentiments surrounding the election outcome, there’s a prevailing belief that current spending and reforms will persist into the next term, potentially even accelerating. This optimism fosters hopes of sustained growth momentum, driving investor behavior.

How much valuation risk do you see in the broader market in FY25?
Vinit Sambre: The present market seems to be fairly priced based on FY25 earnings estimates, with most sectors trading at rich valuations or fair valuation. Interestingly, there are very few opportunities available at reasonable valuations today, one amongst them is banks. Moreover, there are looming risks to earnings growth over the upcoming quarters, primarily due to persistently weak consumption trends and the possibility of reduced government spending during election periods. Given the elevated expectations and rich valuations, there is no room for any error.