At a time when the markets have been in correction mode, Union Minister Piyush Goyal said that the benchmark Nifty 50’s valuation of 19 times of FY26 earnings is “decent and reasonable.”
Speaking at the Association of Mutual Funds of India (AMFI) Summit, the commerce and industry minister Goyal said that there is still scope for some correction in the equity market going ahead.
“At a forward P/E ratio of 19 for a developing nation which is the fastest growing country, it (valuation) is still reasonable…some small correction here or there may still happen,” Goyal said.
However, Goyal raised concerns of activity in smaller companies who have been commanding very high valuations thanks to the four year long bull run. For example, a car dealer having a couple of showrooms and a valuation which was hitting the roof.
“We would hear of hundred x price-to-earning ratios being reflected in the stock market valuations. Now that’s something we all need to reflect upon. We need to think through how we will ensure that such run-ups don’t happen in the future because they are clearly artificial,” Goyal said.
He said such valuations are not sustainable and should not be encouraged through any compulsion to deploy funds that they were receiving, or out of the fear of missing out.
He urged the mutual fund lobby AMFI to advise small investors properly amid the ongoing correction, and to ensure that they isolate the advisors giving bad advice to clients.
Mutual fund houses should recognise their duty and responsibility, and not just focus on returns, he added.
Domestic investors
He also lauded the strength that domestic investors have shown in the market through consistent systematic investment plans. With a strength of 70 lakh crore of the mutual fund industry, we can make sure that foreign investors will never dominate the Indian market, he added.
Later in another session, the SEBI whole-time member Amarjeet Singh said that mutual funds can play a role to corporate governance, with AMFI shaping the growth and development of the industry.
Separately and without taking names, Goyal also said that a free trade agreement with one country is “almost done” and two more are chasing the government for a similar pact