Escalation in Middle East may drive correction in overvalued Indian stocks, says Kotak’s Gupta

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An escalation of hostilities in the Middle East makes India vulnerable to oil price shocks and could result in a correction in stock prices, which already seem overvalued based on earnings estimates for the current fiscal, according to Pratik Gupta, chief executive officer and co-head of Kotak Institutional Equities. Gupta said this could cap market upside over the next few months but expects earnings to pick up in the second half of the current fiscal. Foreign portfolio investors acknowledge India's strong macros and resilience of domestic flows, but await a correction to make large fresh investments, he said. Edited excerpts:...