Kotak Mahindra Asset Management Company on Thursday said investors need to be cautious and disciplined on selecting stocks for the portfolio.
In an interview to CNBC-TV18, Nilesh Shah, managing director, said, "Essentially for debt market, systematic liquidity becomes a critical portion. If there is no systematic liquidity, where banks have to go and borrow money on a daily basis from Reserve Bank of India (RBI), their appetite to buy in the market or their appetite to give credit to borrowers reduces and that passes through the entire system, where corporates who cannot borrow money from banks starts redeeming from mutual fund to fund their requirements."
"Mutual funds become seller and insurance companies also looking at this kind of opportunity. Probably they deferred their purchases and we see a scenario, where short-term yield starts moving up. Eventually, that gets reflected into medium-term and long-term yield. So, it's extremely important to maintain systematic liquidity and this advance tax outflows caused a temporary shortage of funds and the fear gets accentuated little bit further by Compensatory Afforestation Fund Management and Planning Authority (CAMPA) funds, which were supposed to move from banking deposits to government account," he said.
According to Shah, the steps taken by RBI providing liquidity to the banking system will be positive and some of this liquidity has to come towards non-banking financial companies (NBFC) sector, where refinancing is coming under a little bit of pressure.
However, if there is systematic liquidity at some rate, eventually it will flow towards the needy borrowers,” he said.
Shah said governments and elections don’t impact markets and portfolio as much as they impact on the day of election result."
“Correction in the blue-chip stocks will also come and the experience does suggest that most of these corrections have proven out to be a great opportunity. In real life, a lion always remains lion till the death. In the stock market, a lion can become a jackal and jackal can become lion. So you have to be careful about that but with that caveat, if you buy a blue-chip stock on the way down, invariably over a period of time, it has turned out to be a great opportunity,” Shah said.
“If oil goes to triple digit then yes, market has seen the highs of the year. If there is uncertainty about political elections in May 2019 then yes, probably market has seen high. So a lot will depend upon how event shape up. Fortunately for us, one event – US Fed – has passed through reasonably well, they haven’t surprised the market, they have more or less delivered as per the expectations of the market, but clearly there is Trump and tariff war, which is also raging and one doesn’t know which way that will move on. My feeling is that if we play smartly, we could take advantage of this tariff war,” he further mentioned.