Market signals mixed; stay neutral on equities with a long-term view, says Nilesh Shah of Kotak AMC
Nilesh Shah, MD of Kotak Mahindra AMC says there are mixed signals in the market for various segments. While there is a green signal for large caps, there are red signals for micro, mini-caps and SMEs. In an interview with Mint, Shah recommends investors should maintain a neutral allocation to equity with a long-term view while keeping some cash to increase exposure when valuation is cheaper.
Edited excerpts: Different signals are there in the market. There is a green signal for large-cap trading at a slight premium to the historical average. Yellow signals for small and mid-caps trading at a higher premium than the historical average.
There are red signals for micro caps, mini caps and SME exchanges where valuations are at a significant premium to historical averages. India is trading at a premium valuation about eight times higher valuation than Russia, three times higher valuation than China and twice that of Brazil and South Africa. Such a high valuation requires the consistent meeting of the market expectations.
Also Read: Sensex, Nifty 50 fall about 1% each; what should be the investment strategy in a volatile market? Apart from usual triggers, one event that we have to watch out for is whether our peers continue to score self-goals. India is valued at a premium to peers as not only are we doing well, but also others have scored self-goals. Russia’s conflict with Ukraine has pushed global investors to exit the market.
China’s struggle with the real estate sector and Taiwan is keeping investors on tenterhooks. If our peers get their act together like us, then we will have a competition to attract flows. Also Read: MSCI deletions reflect falling confidence in China stocks Implied volatility in the derivatives market
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