Amid soaring valuations in the Indian stock market, investors are finding limited opportunities for value investments, according to a statement from a fund manager at Mirae Asset Investment Managers.

Neelesh Surana, Chief Investment Officer – Equity at Mirae Asset Investment Managers, noted concerns about certain sectors where valuations have outpaced underlying fundamentals. The firm, which manages assets worth over Rs 1.64 lakh crore is particularly cautious about pockets of frothiness in the market.

Recent regulatory measures have been implemented to control flows into schemes investing in small and mid-cap shares, reflecting heightened concerns over surging inflows into these funds. Over the past 52 weeks, the Nifty Small Cap 100 index surged by 66.01 per cent while the Nifty Mid Cap 100 index rose by 60.64 per cent, far outpacing the benchmark Nifty's 27.34 per cent increase over the same period.

Surana highlighted areas of market froth, particularly evident in public offerings of small and medium-sized companies that are drawing substantial subscriptions, indicating excessive liquidity chasing certain small and mid-cap stocks. Additionally, sectors witnessing momentum and earnings recovery, particularly among small-sized industrial firms, are experiencing a buildup of froth.

With national elections scheduled by May, Surana suggested that markets may begin factoring in election outcomes, with expectations largely favouring a comfortable victory for the ruling Bharatiya Janata Party. Post-elections, he expressed optimism regarding GDP growth, particularly for sectors like IT services which are currently underperforming.

Moody's Investors Service recently revised its GDP forecast for India upward by 70 basis points to 6.8 per cent for 2024, reflecting positive sentiment towards the country's economic prospects.

(With Reuters inputs)