On concerns and risks to market liquidity, Prashant Jain, CIO and Founder of 3P Investment Managers, notes that the current shift in liquidity could be more seasonal rather than structural. "In my experience of 34 years, I have seen similar bouts of liquidity, domestic liquidity coming to the markets on three, four occasions," Jain added.
He attributed the current situation to significant changes over the past few decades. He notes that a lot of work, a lot of education being done by funds, regulators, media, distributors, banks, IFAs has led to a better understanding of market dynamics among investors.
Jain continues to remain optimistic about domestic flows being long term. "Most of this money is fairly long term, and I think it would sustain," he said adding that investor behaviour could shift if market returns stagnate. "I feel when three-year returns become zero or extremely low, that is the time when the domestic flows could moderate, but we are nowhere close to that," he said.
Additionally, he commented on the potential for a market adjustment in response to new offerings. "Though I do feel that if more issues or people don't make as much money as they have in the past, the pricing of these issues should become more moderate, more reasonable, which I think would be a win-win for everyone," Jain said.
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