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Nifty trades at 18x 1-year forward or 20 percent premium to the last 10-year average and comes up as the key investor concern in most discussions.
Higher inflows are the reason for premium valuations.
Historical flow analysis implies if monthly net inflow remains at or above USD 400 million, the uptrend should continue, he said, adding this is also a base case assuming continued strong domestic flows, doubling of equity offering partially offset by higher buybacks over the next 12 months.
The key risk is much higher equity raising than anticipated. Higher valuations, however, make the market look farther ahead, bringing the potential capex cycle recovery in sight.
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