Nifty@11K: Experts says one can still put in fresh money; cap goods may lead

Damani says, although it is always prudent to be cautious in the market, one can still put fresh money in the market.

Market is not showing any signs of a top just yet, says Damani, adding that one is not seeing any alarming levels of fund raising by Corporate India.  Therefore, it looks like the market can absorb a lot more buying and selling right now.

Nilesh Shah, MD, Kotak Mahindra AMC says Nifty at 11000 is another milestone achieved. Finally the dream of making returns in Indian equity market is coming true. There are flows coming from every nook and corner into Mutual Funds via SIP, so overall, the feeling good.

He says there are some pockets in this market where one needs to be extremely cautious – not all the IPOs are worthy of investments, however, overall there still opportunities available. In sectors like IT there could be a potential catalyst in terms of growth or rupee movement, which could give good returns, adds Shah.

Gautam Shah of JM Financial says the Indian investor needs to be congratulated for really being a catalyst and a real pillar of strength behind this excellent move that we have seen.

According to Gautam Shah, this bull market is very different to bull markets seen in the last 20-25 years – the power of domestic money has killed volatility. For example in the earlier bull market between 2003 and 2007, while there were corrections of 20-25 percent in the current bull market the maximum correction has been that of 5 percent and that has helped build the confidence of investors.

The house, says Gautam Shah has been working with a target of 11,111 on the Nifty and once it gets to that, they would review again. It is not a froth, not a bubble but if one is sitting on trading profits then this could be a good time to book some profits because in a week's time we would be heading into Union Budget and the manner in which US markets have gone up, it could get uncomfortable.

Long-term investors can stay put and ride this excellent move, adds Gautam Shah. Sector specific, he strongly believes that capital goods is the space that will lead market from these levels. Capital goods is where banking was a couple of years back.

Since at these levels, one has to be careful of risk rewards and capital goods is the only sector in the market which gives a risk reward of 1:4 or 1:5, adds Gautam Shah. He says, another sector that could be a potential dark horse is power, after an underperformance of many years.

"The rally is getting broad-based, there is lot of leadership in the market," says Gautam Shah, adding that there is a case of rotation correction across sectors, across market caps from time to time.

Below is the verbatim transcript of Ramesh Damani's interview.

Anuj: You have joined us on a day when we have hit 11,000 on the Nifty and very close to 36,000 on the Sensex. What would be your advice to investors right now, just savour the moment, and participate in this bull market?

A: We have seen a number of records globally and in India on indices. I think Sensex and the Nifty have made repeated new highs last year and this year. So it is great, it is now round number and we are always very thrilled when we get to a nice round number. However, it is not a psychologically important number for the Nifty, it is just a nice round number that makes you feel good.

Regarding the later question, should we invest at this level, I think most market veterans have been telling for a long time that this is as good as any other level to stay invested in the market. I think we might see some rotation from the smallcaps to the largecaps now because I think there is value and money coming into the largecaps. However, broadly I think the answer is to remain invested in high quality businesses.

Latha: I saw you at the cake cutting ceremony for 35,000 in the BSE. Did you imagine 36,000 coming so quickly? Is there a caution at all because now everyone is using the word melt-up?

A: First of all now the distance between 35,000 and 36,000 is a mere 2 percent or 3 percent. So it is not that meaningful anymore. I think we have to look at round numbers 30,000 to 40,000, 40,000 to 50,000, that will be more meaningful. Regarding caution, we always need to be cautious in the market. I feel the day we are not cautious is when the market punishes us. However, having said that, am I fully invested? Yes. Would I put fresh money into the market? Yes. Can there be a correction tomorrow? Yes. However, that is the nature of this business.

Latha: Have we gone away from just consumption now because yesterday we saw Larsen and Toubro (L&T) leading, for the last two weeks we have seen IT stocks leading, Mindtree was the one that triggered that rally as well; getting more broad based therefore more to choose from?

A: I think it is moving from small and midcaps which are well valued and which are not participating in the last few 1,000 points, into the largecaps because foreigners are now putting back into the Indian market. So my sense is that it would be more largecap liquid stocks rally led than the midcaps which are probably pausing. They had almost an unbelievable run in 2017. So I would not be surprised if they took a break, took a pause that refreshes and the market leadership restores back to the liquid Nifty stocks for example.

Sonia: Are we anywhere close to a mature stage of this bull market or is this still extremely at a nascent stage; that is the question that everyone keeps asking us, so I thought I will pose it to you?

A: Are we at the mature phase of bull market? If you look at the index chart from different time phase, I think if you look at three years from some other peak, as someone pointed out to me, it is up only 15 percent, the Nifty. So it is like a CAGR of 5 percent over the last three years which is nothing meaningful. The market has been bedazzled by the absolutely stunning rise of the smallcap and the midcap universe. So having said that, I feel that the market is not showing any signs of a top yet.

Just because it has risen so sharply in terms of stock prices or your portfolio, the market shows top signs in terms of being overleveraged, the forward rates being very high, very poor quality IPOs hitting the market, a lot of nonsense being talked by the people in the market, I don’t see a sense of business like going on with corporate India, there has been some money raised but it is not at any alarming levels yet and clearly the market screen suggests that the market can absorb a lot more buying and selling right now and there is no sense that we are closing in on a top as we did in 2008 or say in 2000, I don’t see that.

Anuj: The QSR space -- that has been your big bet and that is paying off now.

A: It is. The results that came in from, one of them was very heartening. Let us see how the other one does also. However, these are good long term stories, these are stocks – if you go back and see what stocks have compounded – say Gruh Finance which I owned, just saying as a matter of reference, it has compounded for so many years 25-30 percent, I think the QSR will do the same over the next 10-15 years period because the inherent attractiveness of the business as we move from unorganised to organised, people wanting access to clean hygienic food, so, I think these are long terms stories. They have rewarded us in the short run, that is good enough, but I think they still have a long way to go perhaps.