Moneycontrol PRO

Not every IPO is worth subscribing to in a bull market, says Keval Bhanushali of Marwadi Shares

The market will stay range-bound for the remaining period of FY22, with inflation and the geopolitical situation weighing on sentiment in the short term, says Bhanushali

August 31, 2021 / 11:55 AM IST

Keval Bhanushali, CEO, Marwadi Shares and Finance, expects the Nifty to remain rangebound for the remaining part of FY22. On the downside, Bhanushali sees the index slipping to 15,500 and says the upside looks capped around 17,000, as all the positive macros have been already been factored in.

In an interview to Moneycontrol's Sunil Shankar Matkar, Bhanushali advises caution even as the rush of initial public offering (IPOs) heads into September. New investors should be careful, as not every IPO is worth subscribing to in a bull market, he says. Edited excerpts:

Considering the current sentiment, do you think the rally will continue and can the market add another 10 percent by the end of FY22?

A 10 percent addition to markets from here would be a yes if you talk about sentiment but the answer would be a firm no if you talk about fundamentals.

I see the markets staying range-bound for the remaining period of FY22. On the downside, we may see levels of 15,500 and the upside looks capped around 17,000, as all the positive macros have been already factored in the current rally. Inflation and the geopolitical situation will keep the market rangebound for the short term.

Close

Do you think the current geopolitical tensions including Afghanistan and US-China trade ties will have an impact on Indian markets? What are global risks that one has to consider before investing in equity?

Not only India but also other Asian corridors will be impacted along with the US. It will be interesting to see how long the rest of the world can be indifferent to Afghanistan and global terrorism. Eventually, some remedial action has to be taken and will be taken. Before or after an unpleasant event is a political choice for global leaders.

Investors should always protect their portfolios from unforeseen and sudden circumstances by tactfully hedging them through index Put options. We strongly recommend 2-3 percent of the allocation to our HNI customers into Put options. No one can ever predict such events but they do occur in some form or shape.

The government has been doing its bit to revive the Indian economy. What more needs to be done? Can India report more than 10 percent growth in FY22?

The biggest reason for this rally to sustain in India has been the Central government's constant and 360-degree growth intent. Despite all the adversities and crises, this government has been able to keep the ship sailing. One must not undermine that achievement.

Also, we must understand that, unlike the US, we did not have the luxury of printing $3 trillion worth of new money as the current special drawing rights (SDR) structure would have taken our inflation through the roof. With this intent and realisation of Rs 6 lakh crore through the sale of assets and disinvestments, we may most likely witness a 10-12 percent kind of growth for FY22. The Delta variant being the only possible party spoiler.

Also read: Many IPOs likely to hit Dalal Street in September but pricing could be reworked after recent market nervousness

After 38 IPOs in eight months in 2021, the primary market activity slowed down a bit. Listings in August largely disappointed investors. Do you think it is because of higher valuations or a change in the market mood? Will it impact subscription levels in the coming months?

I think it's just too much to absorb for retail investors regarding IPOs. Also, each IPO has a different valuation coupled with a different matrix of evaluations. With such low financial literacy, it is challenging for any retail investor to take a judicious call without seeking assistance from a qualified financial advisor. So we had to create a separate research wing to evaluate these new-age businesses with a new matrix. One has to see that we have witnessed significant corrections after that whenever IPO markets have been flooded.

Overvalued IPO is one of the most prominent mediums where money is transferred from mass retail to a handful of people. Since 2016, a total of 116 IPOs have debuted on the bourse. Not even 30 of them have outperformed Nifty after five years.

The highest IPOs we saw in a year were 108 in 2007. Most of those have never seen their issue price. So, it is of great importance that the new investors stay conscious of this fact and invest cautiously. Not every IPO is worth subscribing to in a bull market.

Also read: Two IPOs seek to raise Rs 2,465 crore on Dalal Street: Which one should you bet on?

Do you think permitting FDI in LIC is an essential step towards the insurer’s IPO? The government already allows FDI of up to 74 percent in private insurance companies.

Whatever will be the call, it will look wrong in hindsight. Such high dilution of the most valued company of a country in a domain that is evident to grow will be criticised in future for sure. But one must also understand that if that step is not taken, there shall be no growth. So LIC has to be treated differently than any other private insurance company.

Disclaimer: The views and investment tips expressed by 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.
Sunil Shankar Matkar
first published: Aug 31, 2021 11:55 am
Sections
ISO 27001 - BSI Assurance Mark