Even as the market is surging to fresh record highs with every passing session, inflows from domestic institutional investors (DIIs) are also aiding the rally. Fund managers are reportedly having a problem of plenty, sitting on piles of cash and looking for bigger opportunities in the market. They are also skeptical on the valuation of many stocks, which are said to have run up ahead of their earning.
HSBC Global Asset Management Company (AMC), too, believes that there are differences in terms of valuations across the spectrum. But it would be risky to not remain invested in the market, Tushar Pradhan, CIO, HSBC Global Asset Management told CNBC-TV18 in an interview.
Having said that, he also observed that the market was not rising just because of sentiment or liquidity. There has been an earnings surprise in many cases and such fundamentals are driving it, he said, adding that earnings in FY18 could be better. “The market is assessing the earnings which have been much better than anticipated,” he told the channel.
On a sectoral basis, Pradhan said that information technology has had a cloudy opening this year. “The strong rupee is causing a dent on the margin now,” he added. But, if there is a controversy or shock, which can cause valuations to come off, from a long-term perspective, there is an opportunity there, he said.
Meanwhile, non-banking financial companies (NBFCs) do have some bubble if you look at absolute valuations, he said. Financials should not trade at such multiples of their book value, he added. The rationale lies in the market preferring companies which do not have legacy assets and potential problems of growth. If you look at available opportunities, the preference to stick to these stocks is leading to this premium, he added.
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