ETMarkets Smart Talk | Valuations ahead of earnings — Time for bottom-up value picks: Shrikant Chouhan

In this edition of ETMarkets Smart Talk, we caught up with Shrikant Chouhan, Head of Equity Research at Kotak Securities, to decode the current market setup amid rising volatility and persistent FII outflows.

As Indian equities trade in a tight range with global uncertainties weighing on sentiment, Chouhan emphasizes the importance of bottom-up, value-driven investing, especially in a landscape where valuations appear to be running ahead of earnings.

He shares insights on retail investor behaviour, IPO momentum, sectoral opportunities, and why smart money is gravitating toward hospitals, digital-first firms, and capital market-linked businesses. Edited Excerpts –

Q) The second half of 2025 started on a volatile note. How are you looking at the markets? One of the reasons could be FIIs selling, which continues in July.

A) Markets are trading in a tight range, and we believe they will remain directionless until clarity emerges on tariff-related announcements from Mr. Trump. Aggressive buying is absent, as investors are selectively hunting for value.

FIIs continue to sell, largely due to stretched valuations and the attractiveness of the US bond market. Additionally, a weaker currency—hovering around 86—adds to the negative sentiment for foreign investors.

Q) IPOs have picked up recently, but EY report highlighted that Indian IPO activity in the first half of 2025 recorded 108 deals raising US$4.6b, demonstrating market resilience despite a 30% decline in transactions.

A) IPO enthusiasm is being driven by retail flows and QIP money, but sustainability depends on post-listing performance. Value-backed companies will still find takers, even if broader activity moderates.

Q) What is the initial sense you are picking up from the June quarter results, which have started to come out?

A) Q1FY26 results so far lack surprises, coming in largely in line or slightly below expectations.

Q) Is the current equity market rally largely liquidity-driven, or are there sufficient earnings fundamentals to back the optimism?

A) We are witnessing a classic bottom-up approach in the market, supported by strong domestic macro tailwinds.

Q) SIPs crossed Rs27K – what does it talk about the retail investor behaviour change?

A) Retail investors are on the right path—sticking to a disciplined strategy that aligns with long-term wealth creation. This shift in behavior seems structural, not cyclical.

Q) Where are the pockets of opportunities coming from?

A) In a market where valuations run ahead of earnings, the only prudent strategy is selective, bottom-up, and value-driven investing.

Q) Where is the smart money moving?

A) Hospitals, capital market-linked businesses, and digital-first companies appear to be in the spotlight, steadily attracting fresh investments from informed investors and institutions alike.

Q) How should one play the small & midcap space?

A) Stock selection demands caution. Before investing, give top priority to corporate governance, analyze the P&L and balance sheet, and assess the company’s market share and business model in depth.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)