In an interview with CNBC-TV18, Nimesh Shah, MD and CEO of ICICI Prudential AMC, shared his views on the present market scenario and offered investment lessons from past market cycles.
Typically if you see whenever the foreigners are divesting, that is the best time to invest into equity. Look at what happened in 2002, 2008, 2011, [they were] the best times to invest.
We have got a model where you should invest when sentiments in any asset class are negative and when there are outflows happening from that asset class basically when foreigners are selling.
So, anytime when foreigners have sold and Indians have bought they have always made good money as long as they have got a paradigm of 2-3 years. Emerging market outflows is an issue and that can continue. Nobody knows what the bottom of the market is but one can say that the market is quite fairly valued. It is neither expensive nor cheap today, especially in the large capital space and not in the mid-capital space.
If you have seen us over the last one year we have said that we have never been in favor of mid-capitals.
The large capital is a good place to invest keeping in mind the outflows that are occurring. One should invest whatever equity allocation one wants to do for a retail investor who has not invested much in equity, whatever equity allocations that he wants to do 20 percent of it should come in today and that is what my view is.
Divide it into five parts every month invest 20 percent of it. By the month of May you should be fully invested what you want to invest in equity. From May onwards over the next 2-3 years the equity investor can make good returns. Within large capital funds it is better to go for diversified sectors because while we are bullish on a couple of sectors I can say regulated entities that we like because in this kind of uncertain atmosphere if a regulated entity is to get a return on equity (ROE) of 15 percent that looks like a very good return. So, this is a time to invest in regulated entities. This is a time where there are some private banks which have been corrected significantly. So, there are banking funds that one can put in at this point of time.
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