Some of India’s biggest investors are nervous but not everyone wants to leave the party

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Some of India’s biggest investors are nervous but not everyone wants to leave the party
  • Data shows that large cap stocks (Nifty 50) have seen a 4% rally in the month of September at least 15 times in the last 20 years.
  • Experts like Raamdeo Agrawal of Motilal Oswal Group and Biju Samuel of Elara Capital say that the benchmark index will continue to rise more from here while others like Howard Marks of Oaktree Capital are nervous.
  • Benchmark equity market indices, Sensex and Nifty 50, have surged over 21% this year so far.
The fastest 1,000 point rally that took Nifty 50 past the 17000-mark in less than a month was bound to trigger a debate. Data shows that large cap stocks have seen a 4% rally in the month at least 15 times in the last 20 years. However, India has never seen a rally like the one we have, in the last few weeks and months. Benchmark equity market indices, Sensex and Nifty 50, have surged over 21% this year so far.

So will the momentum continue further or is a correction overdue? While we look to experts for cues, they don’t get it right all time.

While Howard Marks of Oaktree Capital exited all his India investments in June itself, Christopher Wood of Jefferies increased his weight on India. Bank of America Securities, in its report dated August 20, called for 9% correction on the Nifty and a fall to 15,000. Instead, we saw another 5% rally since then.

Even at the current level, market veterans are still divided. Let’s look at some of the recent commentary by some market experts:


Nilesh Shah says book profits

Nilesh Shah says book profits
BCCL

In an interview with CNBC-TV18 on September 7, Nilesh Shah, managing director at Kotak Mahindra Asset Management Company (AMC), said most of the market is priced near fair value or little above fair value and, therefore, it is the time to book profits in equities.

There are some pockets with high valuations, but one needs to be a growth investor rather than a value investor because you are unlikely to find too much offer value.

“The rise in corporate profits is fuelling the up move in the market,” he said. Barring certain stocks in the energy sector and public sector companies, which are reasonably below the historical average, most of the market is fairly priced.

Some of the fund houses’ largest holdings include large banks like HDFC Bank and ICICI Bank. Infosys and Ultratech Cement were other top holdings of Kotak Mahindra’s largest fund ⁠— Kotak Flexicap Fund with ₹37,000 crore assets ⁠— shows data by Value Research.

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Chris Wood turned contrarian and got it right

Chris Wood turned contrarian and got it right
BCCL

With nearly a third of his portfolio ⁠— 31% to be specific ⁠— Christopher Wood, global head of equities at Jefferies, must be enjoying his call in August to increase the weight of India investments.

The decision came at a time when the world at large was worried about rising inflation in the US, which may lead to a rise in interest rates and lead to an outflow of funds from emerging markets like India. The breakneck rally since March 2020 could have made anyone nervous.

However, Wood was looking at something else. “A new property cycle has commenced, a broader capital spending cycle should be coming sooner or later while the best companies have profited from deleveraging triggered consolidation in sectors like residential property and housing finance and indeed consumer finance in general. Meanwhile, the central government remains firmly pro-growth,” Wood reportedly said.

Some of the top stocks in his portfolio are ICICI Bank, Godrej Properties, ICICI Lombard General Insurance, ICICI Prudential Life Insurance, HDFC and Reliance Industries, according to an ET report.

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Raamdeo Agrawal fears ‘overheating’

Raamdeo Agrawal fears ‘overheating’
BCCL

The chairman of Motilal Oswal Group is reminded of the bull run from two decades ago and he believes investments are bound to grow if the investors hold for 2-3 years.

His view on the short term is a lot less clear. "Let's see where it goes... There are already signs of overrating, but I feel comfortable," Agrawal told CNBC-TV18 on September 6.

Motilal Oswal AMC’s biggest bet in its largest fund -- Motilal Flexicap Fund -- include Vaibhav Global, HDFC Bank, Infosys and Gland Pharma, shows data by Value Research.

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Edelweiss expects a good September

Edelweiss expects a good September
Edelweiss

The research team at Edelweiss says that there have been 15 instances in the last 20 years where the month of September has seen Nifty move by 4%.

This gives us an insight about how September has historically been a trending but volatile month for the markets. With the current momentum in the Nifty being on the bullish side, and the previous time series analysis supporting the bullish trend, we can expect this bullish momentum to continue, said a report by Edelweiss Wealth Research dated September 6.

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Howard Marks missed the last leg of the rally

Howard Marks missed the last leg of the rally
BCCL

One of the popular investment management firms seems to be done and dusted with investment in India given Howard Marks of Oaktree Capital Management has reportedly exited all its investment from the Indian equity market in the quarter ended June, said a report by Economic Times on September 7.

Howard Marks exited its entire position in the iShares MSCI India ETF in the quarter ended June, Securities and Exchange Commission (SEC) filings showed. iShares MSCI India ETF tracks an index composed of Indian equities.

Surprisingly, he had increased its exposure to MSCI India ETF in the March quarter after trimming it substantially in the December quarter last fiscal year.

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Elara Capital sees 19,600 on the Nifty before it cools off

Elara Capital sees 19,600 on the Nifty before it cools off
Elara Capital

Biju Samuel, senior vice president at Elara Capital, has targeted 19,600 points over medium term and 24,400 points in the long term for Nifty 50.

Many macro chart patterns are in favour of the next target 24,400 points too, he said in a report.

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Sampath Reddy expects the rally to continue

Sampath Reddy expects the rally to continue
BCCL

Sampath Reddy of Bajaj Allianz Life Insurance believes that the ongoing market rally can continue despite high valuations as the liquidity withdrawal seems to be gradual, in an interview with Moneycontrol on September 7.

He feels that while the market has rallied substantially in the past year, corporate earnings, which have been robust in this period, are likely to sustain their growth in FY23.

Fast moving consumer goods (FMCG) company stocks offer good potential for long term investors at the moment, says Reddy.

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Sunil Singhania expects festivities to add shine

Sunil Singhania expects festivities to add shine
BCCL

This veteran asset manager of Abakkus Asset Manager expects the markets to remain range bound in the coming two-three weeks before a good festive season brings back the optimism, he said in an interview with ET on August 27.

According to him, there could be considerable pent-up demand on re-opening of the economy and a ‘decent’ monsoon season.

It’s not just the large caps, Singhania sees potential to make money from smaller stocks too. “I don’t think the rally in mid and smallcap stocks is over after a healthy correction of 10-15% in the last few weeks, though the pace of rally which we saw in the last few months may be over,” said Singhania.

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Julius Baer is siding with caution

Julius Baer is siding with caution

One should rebalance portfolio in favour of large-caps and defensives in the near term, advises Unmesh Kulkarni, managing director and senior advisor to one of the largest wealth managers, Julius Baer India.

Kulkarni points out that investors' expectations have risen post the historic market rally. He suggests that one should certainly be cautious and exercise prudence in the near term, in an interview with Moneycontrol on August 30.

"The markets are currently discounting a fair bit of the earnings story, and the margin of safety is increasingly reducing; any disappointment on the earnings front, on account of slower-than-expected demand recovery or higher-than-expected margin pressure, could lead to a contraction in market valuations," said Kulkarni.

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