Market ignoring risks; no room for unbridled optimism, says V K Vijayakumar of Geojit Financial Services
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services believes the real worry is that many small and micro caps of doubtful quality are also participating in the bull run, driven purely by emotion and momentum. In this segment, a crash is inevitable. In an interview with Mint, Vijayakumar explained why he thinks the market is ignoring risks. The market is buoyant with a year-to-date (YTD) return of about 11 per cent in the Nifty.
But the real action is in the broader market, which is experiencing a strong bull run. Nifty Midcap 100 is up by 29 per cent and the Nifty Smallcap 100 is up by 31 per cent YTD. There is some justification for the optimism in the broader market; but the quality of the rally leaves a lot to be desired and, therefore, is a cause of worry.
First, let me explain the positive part. An impressive bull run is happening in segments like railways and defence where many stocks have shot up by more than 100, 200 and even 300 per cent. What are the factors driving these stocks? The 2023 Budget had allocated ₹10 lakh crores for infrastructure development, of which, ₹2.4 lakh crore was for railways.
The Defence Production and Export Promotion Policy (DPEPP) has an ambitious revenue target of ₹1.75 lakh crore by 2024-25. Unlike in the past, massive public spending is happening in these segments. The expansion and modernisation of Indian Railways have resulted in massive orders for railway wagon companies like Jupiter Wagons, Titagarh Rail and Texmaco Rail.
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