GST clarity and valuation levels could spur FII comeback: Chakri Lokapriya

Amid ongoing domestic and global triggers, the Indian equity market is showing signs of cautious optimism, with experts pointing to valuation levels and policy clarity as potential catalysts for growth.

Speaking on recent market developments, Chakri Lokapriya said, “We have seen FIIs selling and usually that happens during periods when the INR falls and INR has fallen to a record low on the back of the tariff uncertainty and the impact on Indian exports, net-net exports. But I guess now the market is actually at a very reasonable level of valuation, trading at 19 to 20 times FY27, so that is a very reasonable number for an even 8% earnings growth. So, against that backdrop, any trigger on the upside, now the GST is a trigger which will take some amount of earnings upgrade, but some amount of tariff clarity will bring back the FIIs.”

Chakri Lokapriya highlighted the structural benefits of GST reforms. “Clearly GST here is a very good thing because the tax rate reductions are fairly substantial. In many sectors it has gone down from 18 to 5, it has gone from 12 to 5, so that means that is a good uptick of about 10% all things being equal to the earnings of these companies because even a 3-4% volume increase will translate to those kinds of bottom line increases. So, net-net it is a sustainable thing. People who were waiting and watching to make a purchase now it is very clear and definitive to make one and second is probably it now opens the room for additional interest rate cuts by the RBI and that will be the next trigger to make the purchases so clearly it is a sustainable good move.”

With GST clarity and relatively reasonable market valuations, analysts suggest that conditions are set for potential FII re-entry and sectoral earnings upgrades.