While, as an investor, one looks at India as a proxy for growth, it’s important to appreciate that not all growth is value accretive. To measure sustainable growth, it must be accompanied by margins expanding and more importantly disciplined capital allocation (capital structure mix of how growth is financed). When the three ingredients are sustainably done well, this consistently results in RoE to expand which is what the markets reward through PE expansion. In this video, we breakdown the RoE expansion as large, mid and small cap and discuss about the sustainability of the growth.

The discussion also touches on flows and liquidity from FPI & domestic money and highlights the importance of managing liquidity and positioning in growth sectors with a focus on risk-adjusted returns as the market potentially faces near-term volatility.