Ace investor and founder of MK Ventures, Madhusudan Kela, pointed out that in the current market scenario, discomfort lies in areas with high valuations, be it capital goods, defence or railways. In a market that's flooded with pockets of lofty valuations, Kela believes large-caps, especially, pharma and FMCG stocks, still offer reasonable risk-adjusted returns.
"I’m particularly interested in the pharma sector—select companies look compelling. FMCG stocks are also starting to move up, and the liquor sector looks like a long-term play," Kela said in an interaction with CNBC-TV18.
Coming to overall market returns, Kela also warned investors against extrapolating past returns with anticipated future performance. "We’ve had tremendous gains in the market over the last 3-4 years, with a CAGR of over 30 percent even at the index level. However, if you’re investing long-term, your return expectations should be moderate," he said.
Kela explained that over time, equities should likely deliver returns that are a few basis points more than those on fixed income and hence, investors should keep their expectations in check.
Another big problem with today's market is the high stock valuations which further put pressure on the scope of further upsides. On that account, Kela advices investors to do the homework and choose funds with good track records when investing in mutual funds. If investing in individual stocks, Kela suggests to be mindful of what one is paying and expect for the company to deliver.
Also Read | Invest fearlessly even if markets are at record highs, but think long-term: Madhu Kela
Aside from that, Kela remains impressed by the resilience shown by the market, which according to him, is even surprising for optimists like himself. "We’ve seen elections, budgets, changes in capital gains, and foreign currency issues, yet the interest in equities remains strong. Equities are now a genuine asset class, not just a speculative play. The fact that Rs 23,000 crore is coming into mutual funds through SIPs gives me a lot of confidence," Kela told CNBC-TV18.
In that context, Kela also remains confident that the market resilience will remain unperturbed by the explosive Hindenburg report that alleged SEBI Chairperson Madhabi Puri Buch and her husband had interests in offshore entities reportedly linked to the Adani group.
"Because of this event, I’m very clear: investors don’t need to worry. This isn’t going to destabilise India or the markets," Kela stated.
Also Read | India set to close in on China as emerging-market stock anchor
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