Amit Jain, Chief Strategist - Global Asset Class, Ashika Group, feels that there is a bubble in the global debt market, and that there is a bubble in almost all global asset classes at this point of time, which includes bonds, Bitcoin and equities, with lots of derivatives and structured products built around them.
Prior to his entrepreneurship stint with Ashika Wealth, Amit Jain worked in the banking & financial services industry for eighteen years. In his last assignment, he was at Reliance Capital Group Company as Business Head for the India region.
In an interview to Moneycontrol's Kshitij Anand, Jain said that the Nifty is currently trading at a pric-to-earnings of 26 & price-to-book of 4 times, which historically is the orange zone for the index, hence, retail investors should be cautious while making a fresh buying at this level.
Edited Excerpts -
Q) What a month it has been for markets! Fresh record highs, which was followed by some volatility in the broader market space, and then again we found some stability. How is the market looking according to you?
A) Markets are looking bullish on technical grounds, however, the impact of the Vodafone crisis, and higher delinquency in retail loans are keeping Bank Nifty under check.
In the short term, IT Sector & Metals may continue to lead the pack for broader markets. After a very long time, we are seeing FII’s are back in Indian Markets with net buy figure of Rs. 3500 crores month-till-date. This technical bull trend may continue in the short term.
Q) Well, Jim Riggers has warned of a bubble in the debt market space across the globe, and the warning was stretched to stocks as well. What are your views – is the market in a bubble zone and the hope-based rally could take a knock?
A) In my personal view "The bull run in Global bond Market, which started in 1981, is coming to an end ". I know it is a very bold statement, but personally, I have a conviction on the same by keeping an eye on the current Global Economic Cycle & ongoing Global Central bank monetary policies.
I agree with Jim, that there is a bubble in the Global Debt Market, but I also add that there is a bubble in almost all Global Asset Classes at this point of time which includes Bonds, Bitcoin & Equities, with lots of derivatives & structured products built around them.
Also, the way loss-making companies are getting valued globally, keeping hope on their future earnings, I feel even there is a bubble in the private equity space as well.
These bubbles are created due to a lower interest regime by Global Central Banks post 2008 financial crisis. In my view, these bubbles will only burst with World War 3, else they may continue forever as they are the in-built proposition of the current global monetary system of fiat money.
Q) What are your views on the EV space which seems to be getting all the attention? Many companies are coming out with CAPEX plans on developing EV or switching to clean energy?
A) Today, in an era of Global warming, the World doesn’t have a choice, but to launch EV vehicles at the earliest. We are at the cusp of the beginning of a new cap-ex cycle by the entire Automobile Industry keeping an eye on this transition from fuel base vehicles to Electronic Vehicles.
I feel it is a great opportunity to buy in this space with a stock-specific approach from a medium-to-long term.
Every correction in this sector needs to be bought at least for the next year. I feel some companies in this sector may be multi-bagger keeping the year 2030 in mind.
Q) Small & midcaps have gone up 3-4x from the lows. Do you think this euphoric rally has stretched beyond the limit? When could the music stop?
A) Yes, most of the quality midcap & smallcap stocks are up from 100% to 600% in the last year. In my view, this is too fast run-up, that too in too shorter time period, hence we may see some time correction & price correction in both indices.
Again like 2008, both indices are trading above Nifty valuation, which is always an alarming sign for these stocks.
Q) What is your investment mantra or your checklist before buying a stock?
A) Today the markets look richly valued, hence it is a little difficult to find good stocks at cheap valuations. However, even if we need to buy any stock, then we focus on the company from the sunrise Industry with a new-age business model, generating an ROE & ROCE of more than 20% & having a Debt-to-Equity ratio less than 0.7%.
Of course over & above these filtration parameters, we do look forward for corporate governance & promoter track record before suggesting that stock to our Investors.
Q) What is your take on current Nifty valuations? Are we trading at a premium and how do we stack up against our emerging markets peers as well as developed markets?
A) The NIFTY is currently trading at P/E of 26 & P/B of 4 times, which historically is the orange zone for the NIFTY, hence retail Investors should be cautious while making a fresh buying at this level.
However, HNI’s & Institutional Investors may buy with due hedging of their positions. India is trading at higher premium valuations compared to other Asian Markets, which always be the case, as it is one of the fastest-growing Economy in the World, hence it deserves this premium compared to other Asian peers.
We are bullish on India due to its structural democratic & demographic framework.
Q) Any pocket or sector which you think could come under pressure in the near future and why?
A) We may see some price correction & time correction in broader midcap & smallcap indices. Also, at current levels, we may see some downward trend in some Pharma & auto ancillary companies.
Q) The much talked about $1 trillion infrastructure bill got approval from the US Senate. Which sectors could benefit from the move?
A) Yes, that may be the next booster for all commodity stocks including metals, cement & infrastructure-related companies. This move by the US government is inflating all Global markets including India.
Q) The IPO euphoria is only getting bigger by the day. How do you sum up the action? What is the kind of fundraising you foresee for the rest of 2021?
A) Yes, however now this euphoria is settling a bit after Zomato IPO, we may see this euphoria continue till LIC IPO by end of the financial year.
Disclaimer: The views and investment tips expressed by 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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