Sailesh Raj Bhan says valuation excess has been squeezed out: 'The time to worry was two years ago’

“Most of these stocks, when you go back two years back, three years back, were trading at crazy valuations.” When momentum outran fundamentals Bhan said several businesses that had not even completed five or 10 years of operations were trading at 50-70 times earnings during the momentum-driven phase. At the same time, India's overall earnings growth was relatively subdued. “So I think our starting point of valuation was extremely high when a lot of money chased those sets of businesses,” he said.

That, in his view, explains why many investors earned average or negative returns despite India's long-term growth story remaining intact. “I think that is one fundamental reason that we have overpaid for those, or investors would have overpaid for those at that point of time, and hence the returns have been very average or have been falling,” Bhan said. A better entry point now The key change, according to Bhan, is that valuations have normalised without the long-term Indian growth thesis disappearing.

“Today, at least, you're not overpaying for businesses that you were two years ago,” he said. “The starting point has become very attractive.” He argued that investors with a five-to-10-year horizon should view the current phase constructively rather than retreat from equities altogether. “Clearly, in equity, if you have five-year, 10-year capital, these are your markets,” Bhan said. Long runway for Indian equities

Bhan anchored his optimism in India's demographic and entrepreneurial potential. He said the country still has substantial growth to achieve across sectors and remains relatively young compared with developed economies. “If you have that basic assumption that you have got two, three, four decades of growth ahead for India, I think equities will be the single biggest player which is there,” he said.

He also praised Indian companies' capital discipline, saying they are “generally very respectful of capital”. “Second, in every segment, every sector, India still has a lot to achieve, and it's still very young. So the longevity of growth is there. You've got fantastic entrepreneurs. So I think you have a good combination of everything to make things work,” Bhan said. Selectivity remains key While Bhan's message was more constructive than cautious, his argument was not a call to buy everything.

His central point was that the previous cycle punished investors who paid excessive prices for narrative-driven businesses. The implication for investors is that the current market may favour businesses with durable earnings, reasonable valuations and credible capital allocation, rather than momentum alone.