According to Nilesh Shah, the Managing Director of Kotak Mahindra AMC, the market will unlikely go into a long-term bear phase without an unexpected shock.
Experience suggests that a long-term bear market doesn't start from a fair value market and go to an affordable market without an external shock like the US Subprime crisis or the Wuhan virus, he said in an interview to Moneycontrol.
After recent sharp correction, he believes from a fundamental point of view, most large caps and many small and mid caps are now around their fair value. "They are neither cheap nor expensive."
While betting on sectors, he believes the promoter has more share in value creation than the sector. Hence, "always back the promoter who has the vision to achieve something, executes his vision through hard work (doesn't appear regularly on page 3 parties) and has respect for minority shareholders," he said.
Do you think, by any chance, that the market is in a long bear phase?
In the short term, the market is like a voting machine. Flows matter more. In the long term, the market is like a weighing machine. Fundamentals matter more.
From a fundamental point of view, most large caps and many small and mid caps are now around their fair value. They are neither cheap nor expensive. Experience suggests that a long-term bear market doesn't start from a fair value market and go to an affordable market without an external shock like the US Subprime crisis or the Wuhan virus. The market will unlikely go into a long-term bear phase without an unexpected shock.
Given the sharp correction seen in recent months, do you foresee an exodus of retail investors, even though valuations seem to be more favourable now?
Retail Investors have matured a lot over the years through experience, education and hand-holding. In turbulent times, lakhs of mutual fund distributors have hand-held crores of retail investors across almost every pincode in India. Regulators like SEBI have guided AMFI’s investor education campaigns, such as “ Mutual Fund Sahi Hai,” in inculcating asset allocation and long-term investing ideas.
Most importantly, now, when some anxious retail investors question current negative returns in the short term, there is always another investor to share their experience of withstanding volatility. I'm not sure about retail speculators, but I am very confident about retail investors' participation and ability to catch a falling knife In a time like today.
Do you believe the February SIP numbers will be much better despite the recent market correction?
They are not likely to be better, but they will align with the broad trend with some minor corrections. The excess fear-mongering in recent time is expected to have some impact. Many investors haven't realised the importance of advice. They invest, hoping that the trend will be their friend. They invest in the expectations that the last 6 months' performance indicates future performance. Their SIP will likely stop in this phase unless they get a hold of the right advisor.
I pray that people read this article and keep their SIP for the long term rather than trying to time the market. Always remember that time in the market makes more money than Timing the market and more people have lost money waiting for correction than actually in the correction.
Considering the significant correction across market caps, do you expect promoters to start buying their stocks from the market in the coming couple of months?
The promoters will likely evaluate the options of increasing their stake in their companies at this valuation. Currently, corporate buybacks are taxed as dividend income at slab rates. If a window of, let's say, 6 months is opened where buybacks are not taxed as dividends, many buybacks could happen.
Do you expect the Q4FY25 economic growth numbers to exceed expectations and be better than Q3?
The street’s expectations of GDP growth are marginally below the official estimates of Q4 FY 25 GDP growth. With the government accelerating capex, Kumbh Mela, wedding season, and bumper kharif and Rabi crops supporting the rural economy, we believe the Q4FY25 GDP growth should be between 6.5% and 7%. What is important is the trend, not just a quarterly number. India must aim for double-digit GDP growth by further improving ease of doing business.
Which sectors could deliver substantial investment returns over the next couple of years?
The promoter has more share in value creation than the sector. A bad promoter in a good sector will not create value on a sustainable basis. Always back the promoter who has the vision to achieve something, executes his vision through hard work (doesn't appear regularly on page 3 parties) and has respect for minority shareholders.
Having laid the importance of promoter sectors like banking, consumer discretionary and healthcare, looks better from medium to Long-term market outperformance.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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