Indians may be celebrating their first near-normal festival after 18 months of denial, but it has been Diwali on Dalal Street for all these 18 months with some of the standout wealth generators like IT index up to 85 percent year on year (YoY), metals up 150 percent, realty index 125 percent, FMCG and even power index up 100 percent.
Larger indices like Bank Nifty is up 65 percent and Nifty and Sensex over 50 percent.
In an interview with CNBC-TV18, S Naren, ED & CIO of ICICI Prudential Asset Management Company; Nilesh Shah, MD of Kotak Mahindra Asset Management Company and Manish Gunwani, CIO-Equity Investments at Nippon India Mutual Fund discussed at length the market going forward.
First up, Naren said, “There are no fault lines in the domestic corporate sector; they have deleveraged. The government fiscal data is coming out awesome, so you have a huge amount of excess liquidity sitting with the Reserve Bank of India (RBI). So the domestic business cycle looks overwhelming.”
“However, the global business cycle is much more advanced and that is a risk which has to play out at some point in time. So the real risk is coming out of exuberance of investors rather than the problem with the economy,” he said.
Meanwhile, Shah said, “I believe, in the market, there is a red zone. There are a few quality businesses where floating stock is very limited and there are some concentrated holders and because they are unwilling to sell, valuations have reached a high level. They are unlikely to repeat that kind of performance and if existing holders decide to sell, there will be a correction or there could be a time correction as earnings catch up with fundamentals.”
“There is also a pocket where businesses are not there. Circular buying, social media push, everything else has pulled the prices to the moon. Once those stocks are distributed, I am sure those prices will crash. So, avoid these two pockets, the rest of the market is fine but with moderated return expectations,” said Shah.
According to Gunwani, domestic cycles are the place to be for investors.
“In terms of value, typically just like in any last phase of the bull run, the domestic cyclical are the place to be, whether it’s real estate, cement, banks, NBFCs – from a 2-year perspective that is the only theme that will make you money from here,” said Gunwani.
For the entire discussion, watch the video