Support for comprehensive consolidation; cars and global technology offer better risk-reward: Ajay Srivastava

Indian equity markets are likely to remain in a prolonged phase of consolidation, with limited upside potential in the near term, as valuations remain under pressure and earnings growth struggles to meet expectations, Ajay Srivastava, Managing Director at Dimensions Corporate, said in an interview with ET Now.Srivastava warned that the December quarter earnings season could disappoint market expectations, especially after the post-GST excitement largely plays out. “The numbers coming in January could be less rosy than expected. We are still way overpriced given the underlying growth rates,” he said, adding that a weaker rupee near ₹92-93 against the dollar could further hurt corporate balance sheets through currency losses.

Investors should prepare for more turbulence and stock-specific moves rather than broad rallies, he said. “Barring the auto sector, most sectors are struggling with on-the-ground sales. This suggests that consolidation could continue well into next year, at least until there is clarity from the Union Budget on fiscal priorities and capital allocation,” he said.

American technology remains a structural commitment

Despite near-term volatility, Srivastava remains constructive on US equities, especially in advanced technology segments such as artificial intelligence and quantum computing. “If you want to see where value is being created globally, there is no alternative to the US. Sixty percent of future technological value creation will happen there,” he said.

He added that the currency devaluation provides Indian investors with a natural hedge against the volatility of Nasdaq stocks. “We are consumers, not producers, of advanced technology. So you invest where it is produced and earn where it is consumed,” he said, recommending staggered access rather than lump sum investments.

Auto sector a global long-term story

On domestic themes, Srivastava is most bullish on automobiles, especially two-wheelers and car accessories, citing India’s unparalleled manufacturing ecosystem. “Auto is no longer just a domestic consumption story. India will become the most dominant two-wheeler exporter globally in the coming years,” he said.

Low penetration in emerging markets such as Africa and strong export competitiveness position Indian auto companies for sustainable growth over the next five to 10 years, he added. “This is one of the few sectors where India is truly globally competitive.”

Caution on new-age platform companies

Srivastava made a cautious note on new-age technology and platform companies, cautioning investors against chasing valuations without a clear view of profitability. “These stocks are exciting as a casino, but many still have no path to profitability – only a path to cash burn,” he said.He recommended limiting exposure to such companies to 5 to 10% of a portfolio. “Remember that all existing investors are sellers for the next three years. You are buying into companies where everyone else wants to exit,” he warned.

Metals and global assets are becoming increasingly attractive

On precious metals, Srivastava hinted at a growing shift towards silver and gold as capital moves away from expensive domestic equities. “Artificially low interest rates and tax structures are pushing money into equities despite poor risk-adjusted returns,” he said.

Foreign institutional investors (FIIs) are unlikely to chase Indian equities at current valuations, he added. “Why buy Indian stocks at 80-90 times earnings when US AI companies are trading at 30-50 times? FIIs will come, but only at the right price,” he said, noting that FIIs’ participation is largely limited to IPOs and not secondary markets.

Looking ahead, Srivastava expects a broader reallocation of capital to metals and global equities by 2026, driven by valuation concerns and currency devaluation risks. “This could mark a fundamental change in the way Indian investors allocate capital,” he said.