Small And Mid Caps Valuations Will Turn Attractive If... White Oak's Prashant Khemka Explains

Valuations of small and mid caps will appear attractive if the anticipated economic growth in India comes through, according to Prashant Khemka.

If there is sustained robust economic growth in the coming years, there is high likelihood of witnessing significant earnings growth across the market, particularly in the small and mid caps, Khemka, founder at White Oak Capital Management Consultants LLP, told NDTV Profit in an interview.

In such a scenario, he said, the current valuations could also be deemed attractive. "It is fair to stay fully invested, but expectation going forward should be low double digit return."

Khemka is optimistic about small and mid caps even as many others call the valuations frothy. And foreign investors are also cautious about the Indian market because of valuation concerns.

Khemka Many global investors express concern about Indian valuations, and one common mistake they make is comparing India's price-to-earnings multiples to those of other emerging markets, according to him.

India has now become the top priority over China for many institutions and a significant number of new global investors are turning their attention to India for the first time, Khemka said.

In 2013, India held a smaller position in the MSCI EM index with about 5-6% weight. As of today, India has experienced substantial growth, with its representation at an impressive 17%, he told NDTV Profit. "India is rapidly rising in the global benchmark index."

India possesses a unique combination of attributes that set it apart on the global stage. As a well-functioning democracy, it has established itself as the fastest-growing economy, coupled with corporate governance practices that are deemed superior, if not unparalleled, within the emerging market space, Khemka noted.

He foresees a substantial influx of foreign capital in the coming years, attributing this trend to the distinctive strengths and opportunities that the country offers.

Khemka highlights significant opportunities within the financial sector, identifying it as a key focus, with the largest allocation in White Oak's portfolio.

Across the large, mid, and small-cap segments of the market, financials have not participated to the same extent in the rally observed this year, he noted.

Consumption and information and technology sectors are his other picks.