Indian equities in a bubble of epic proportions, warns Siddhartha Bhaiya, Aequitas

Siddhartha Bhaiya is the Managing Director and Chief Investment Officer at Aequitas.

Veteran market participant Siddhartha Bhaiya, MD and CIO at Aequitas Investment Consultancy

sounded a sharp warning on Indian equities, calling the current market a “bubble of epic proportions” rather than a healthy bull phase at the Moneycontrol Deserv Wealth Summit.

According to him, headline valuation comfort around the Nifty trading near 20 times earnings is misleading and masks far richer valuations beneath the surface. He argued that a large part of the Nifty’s low multiple is driven by heavyweight public sector stocks such as SBI, ONGC, NTPC, Coal India and Power Grid, names that most retail portfolios barely own. “Exclude these, and the effective PE multiple of what people actually hold is well above 40,” he said. In midcaps and smallcaps, he noted, multiples have climbed beyond 50.

On the current SIP driven market dynamic, Bhaiya described it as “not SIP, but SWT, a Systematic Wealth Transfer from India’s middle class to the rich.” According to him, steady retail inflows have coincided almost perfectly with promoter selling, he said, "The SIP amount has been matched with promoter offloading."

"What I am seeing is not a healthy bull market, it is not a healthy capital market. We have been peddling this story of India growth story for the last 18 months, everybody cribs about last one year returns because maximum money came in the last 18 months," he said.

"Everybody talks about asset allocation but in 25 years of investing, you know when a bull market comes or a bear market comes, your asset allocation is thrown out of the window," Bhaiya added. "Be careful," he cautioned investors, "don't listen to narratives. Go back, look at your portfolio, what the PE multiple is."

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.