Markets thrive on hopes of end of rate hike cycle; overall valuations reasonable: Harshad Patwardhan of Union AMC
Harshad Patwardhan, CIO at Union Asset Management Company (AMC) Private Limited, believes that the overall market valuations are reasonable. However, there are pockets of overvaluation in select segments and they can be vulnerable to any sudden change of sentiment. In an interview with Mint, he shared his views on the markets, economy and interest rate trajectory, among others. To understand the current behaviour of the market in a proper context, let’s first review how the market behaved in the earlier phase.
Between October 2021 and March 2023, the Nifty50 index was almost flat (down 1.5 per cent point to point) but very volatile, with meaningful corrections and recoveries. NSE Midcap 100 index behaved broadly in a similar fashion, down 1.1 per cent point to point over these 18 months. While NSE Smallcap 100 index peaked a little later but remained weaker subsequently, declining 17.4 per cent in this period.
The behaviour of the market seems to have changed from the beginning of FY24. From April 23 to the end of August 23, Nifty was up 10.9 per cent, while the NSE Midcap 100 index and NSE Smallcap 100 index jumped 30.2 per cent and 36.1 per cent, respectively. September has also been a strong month, so far, particularly for midcaps and smallcaps.
We believe a key reason for the equity markets doing better over the last few months is an expectation that we are close to the end of the interest rate upcycle. The reason why small and midcaps have outperformed in recent times is that the incremental domestic flows are concentrated in this category and the smallcap category had meaningfully underperformed in the previous phase, as explained earlier. Medium to long-term prospects of the Indian economy, corporate sector and
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