“It’s time to take some money out of equities because valuations are looking stretched,” Gopikrishna Shenoy, chief investment officer at SBI Life Insurance Co., said in an interview. “There’s no immediate indicator of a return to sound earnings growth and it will take some time,” he said.
The uncertainty regarding the election outcome has prompted investors to shift into shares of top Indian companies over the past 18 months from their smaller counterparts. During the period, the key S&P BSE Sensex and NSE Nifty 50 indexes rose at least 12%, while the NSE measure of mid-sized companies fell by 15% and a small-cap gauge plunged 29%.
Now the investors are focusing on to see how the new government manage to bolster a slowing economy and curb a cash crunch which have led some companies in delaying or defaulting on interest payments.
SBI Life is hopeful that the earnings at India’s top 50 companies will be rising at an average of 14% in the financial year that started April 1. The insurance firm has reduced its holding in shares of mid-sized companies in its equity funds to 9% from about 22% in 2017 and does not see any immediate reason to change the balance. “We see a lot of value in mid-caps, but we won’t make a major shift to them, at least for the time being,” Shenoy said.
As of March 31, 2018, SBI Life held 2.1% of India’s total 331 million life insurance policies, as per the data on the insurance regulator’s website.
