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Efficient execution of strategic divestment to boost market confidence, says Nilesh Shah of Kotak Mahindra AMC

Updated : October 23, 2019 08:48 PM IST

The Indian investor is facing a dilemma as what is looking safe is not cheap and what is looking cheap is probably not safe, says Nilesh Shah of Kotak Mahindra AMC.

"The broad market is divided into four compartments - the super largecaps which look very safe from a business point of view, result point of view, but are pretty expensive from a valuation point of view. The other largecaps which are at least good from a governance point of view are reasonably priced. The midcaps are at a discount and small caps are at a significant discount to their historical average valuation. What is looking safe is not cheap, what is looking cheap is probably not safe, that is the dilemma facing the market," he said.

He further said essentially the market is looking at continuity of some of the corrective steps already taken. "Between 2012 to 2019 banking system by and large remained short of liquidity. From May 2019 onwards banking system has become positive liquidity. What market needs is an assurance that the banking system will remain positive liquidity in the days to come. Interest rates were high on a nominal as well as real interest rate basis. They have been cutting down and 135 basis points rate cuts have already happened. Market needs more of the rate cuts in the days to come. Also efficient execution of strategic divestment; for example, there is talk of a refinery company or an airline company, if that gets executed certainly that will be boosting the market confidence," he observed.

On Infosys whistleblower complaint he said, "It is always difficult to say who is right or wrong in such a scenario. Is the whistleblower right or is he trying to blackmail the company? The best answer on this is a time-bound and an impartial enquiry which can separate milk from water. Infosys is clearly the bluest of bluechip company on corporate governance, they have a fantastic track record and quicker they solve the doubts in the mind of investors better for everyone."

Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
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