The benchmark equity index fell by 1,000 points on Friday because investors are concerned about the ongoing correction which has dragged the benchmark equity index down by another 1,000 points intraday. The 30 share index was 2.34 per cent lower at 57,419 at around 10.50 am IST. The equity index lost more than 2,500 points in November. It was above the 60,000 mark on November 1.
Nilesh Shah, the managing director of Kotak Mahindra Asset Management believes that investors have a great opportunity to enter the market. After certain corrections, he said that if equities continue to correct, you can become overweight on equities.
In an interview with Bombay Stock Exchange Brokers' Forum BBF he said that for any market you need three things including sentiments, money power and third fundamentals.
He said that sentiment about India is turning positive as its active cases are less than 1.50 lakh amid a rising pace in vaccination, which has recently crossed the 115 crore milestone.
Economic activities are above pre-pandemic and life has become normal. The mood is positive and it was reflected in Diwali festive buying, where retail sales went up by almost 60 per cent due to the price increase and a rise in demand, he said. There is a dark cloud that is coming from the global side in terms of lockdowns.
Shah said Austria has returned to a full national lockdown, while Germany is about to announce the same to curb the COVID 19 epidemic. The rise in cases of a new coronavirus variant in South Africa has spooked global markets.
Shah said that the local mutual funds, retail, high net worth investors, insurance and pension funds, are net buyers of equities, despite his thoughts on the money power. Foreign portfolio investors and promoters have turned net sellers.
Promoters are selling in the primary market. They are coming up with QIPs, IPO and offer for sale to reduce their stake. They will sell shares up to a price and they will not sell at discount the moment it goes down. Shah said that FPI will turn buyers into equities soon.
The data available with depository NSDL shows that overseas investors sold shares worth Rs 3,447 crore in FY 22.
He feels that there is an amount of equilibrium and that FPI and promoters will not sell and then buy by domestic investors will make the bottom of the market and even pull the market up.
I am not concerned with the money point of view. The money manager said that we are in a good position for some correction.
If fundamentals are expensive, there will be more selling than buying and vice versa. The street is expecting FY 23 EPS to be delivered at Rs 725 -- 775. It will be about 750 on average. That will put the market 21 times FY 30 earnings. It is not cheap and expensive. The market is valued at 19 -- 21 times, he stated.
The market maven said that the real challenge for us is the profit growth trajectory. The correction may be made to stocks that have sky-high valuation. Shah said long-term investors will make good money over the next three years, because the rest of the market is looking fairly priced, apart from low floating and high valuations stocks. The return will not be as big as we saw in the past 20 months. Shah noted that return expectations have to be moderated at fair valuations.