Neelkanth Mishra of Axis Bank draws lessons from telecom bubble burst, says 'we shouldn't be too afraid'

Mishra cautioned that investing all the money in equity markets can be risky, as corporates should still have access to funds if they need to borrow via bonds.

“We shouldn’t be too afraid of bubbles,” as they often create a sense of euphoria and leave lasting benefits even after they burst," said Neelkanth Mishra, Chief Economist at Axis Bank. He gave the example of the telecom bubble, where many people lost money, but others gained from the cheap internet that followed.

China, recognised as the world's largest saver, directed a significant portion of its savings into real estate. However, with housing prices now declining, the effective deployment of savings has become increasingly critical, noted Mishra, drawing lessons for Indian investors, adding, that the country has become increasingly risk-averse

In India, he says that investors have been provided with a key risk channel: equity. The surge of savings with SIPs and EPFO flows into the equity market has driven valuations significantly higher. For a considerable period, the strong demand from SIPs and EPFO flows outpaced supply. However, this trend is now reversing, he said.

Interestingly, only 37 percent of the equity supply has been utilized for fundraising aimed at investment or deleveraging. The remaining 63 percent has been driven by promoter, VC, and PE exits, capitalizing on high valuations.

Despite this, as venture capitalists (VCs) and Private Equity (PE) players start seeing returns, they are likely to reinvest in India, and hence there is nothing to fret about, he said.

However, he cautioned that investing all the money in equity markets can be risky, as corporates should still have access to funds if they need to borrow via bonds.

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