Valuations of stock markets remain a concern: DBS Bank

By: |
March 26, 2021 8:00 AM

Valuations of the Indian equities remain a concern for investment strategists. While presenting the DBS CIO Insights Report for 2Q21 titled ‘Back on Track,’ the global bank said that the Indian economy was also witnessing strong growth which was in line with the global recovery.

DBSIn DBS’ global tactical asset allocation for 2Q21, US equities enjoy the maximum allocation at 28%, followed by Asia ex Japan equities at 16%.

Valuations of the Indian equities remain a concern for investment strategists. While presenting the DBS CIO Insights Report for 2Q21 titled ‘Back on Track,’ the global bank said that the Indian economy was also witnessing strong growth which was in line with the global recovery.

Joanne Goh, strategist, DBS Bank, said, “Our concern for India has always been the valuations, right now with the valuations at this high we are a bit concerned that it (Indian market) may not be able to outperform the other markets such as China.” She added that even though Indian markets may recover in line with other markets across the globe, in the near term they see more opportunities in other countries like China. The executive noted that India has been witnessing accelerated digitalisation over the period of last one year and if that trend plays out, the Indian markets can justify higher valuations.

In DBS’ global tactical asset allocation for 2Q21, US equities enjoy the maximum allocation at 28%, followed by Asia ex Japan equities at 16%. The developed markets (DM) corporate bonds and alternatives have an allocation of 15% each. Emerging market bonds have a share of 14%. Besides, gold, hedge funds, European equities and Japanese equities have an allocation of 8%, 5%, 4%, and 2%, respectively.

While the speed of the equity rally may see some moderation in the coming months, an extreme drawdown is unlikely, according to DBS CIO Insights.

With reference to the resurgence of Covid-19 cases across the world Hou Wey Fook, chief investment officer, DBS Bank, said, “There will be a few hiccups along the way but, the process of normalisation has started with roll-out of vaccine. The markets are poised to normalise, there is a lot of liquidity, growth is coming back and corporate earnings are also on a firm footing.”

The report expects the outperformance of US equities over Europe and Japan to persist in Q2 2021 as the strong vaccination rollout in the country augurs well for the outlook of economic re-opening and corporate earnings.

 

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