The resilience of Indian markets continues to surprise many experts, with Dhruv Goyal of Four Lion Capital pointing to the ongoing strength of domestic investments. Despite global challenges such as the pandemic and foreign capital outflows, Indian markets, including Sensex and NIFTY 50, have demonstrated an impressive ability to rebound since 2015.
Goyal acknowledges the pivotal role domestic capital has played in keeping the markets afloat, even as foreign portfolio investors pulled out approximately $18 billion in 2022 due to U.S. rate hikes. “Domestic investors have really stepped up, counteracting the volatility brought by foreign exits,” Goyal noted.
Despite this, Goyal is cautious about overvaluation, particularly in the mid and small-cap sectors, which he believes are over-extended. “There’s a worrying trend where prices are being driven up by valuation multiples rather than earnings growth,” he said.
Goyal remains optimistic but highlights risks, including the potential for slower earnings growth and political instability, which could derail the current market strength. However, he’s encouraged by the growing dominance of DIIs and retail investors in the market’s ownership structure, which brings more stability.
