Overvaluation a key risk in market, says Kenneth Andrade of Old Bridge Capital; lists 6 key trends of 2023
Kenneth Andrade, Founder & CIO of Old Bridge Capital Management, anticipates a potential market downturn in the coming year. According to the expert, macro events could be the catalyst for such a decline, with factors such as a global crisis, a country's balance sheet implosion, or a drying up of liquidity in the market being potential triggers. Andrade suggests that a significant macroeconomic event has the potential to remove liquidity from the market.
However, he also expresses a degree of optimism, saying even if that happens the market can bounce back given the back-test experience. Back-testing involves analysing the performance of a strategy or investment based on historical data to assess how it might have performed in the past. He further noted that based on the available data, bankruptcies and insolvency may not be immediate concerns.
Instead, he identifies valuation risk as a key factor that could remain for 'extremely long periods of time like seen before'. In 2023, the Indian market achieved historic milestones despite confronting significant challenges, including the Russia-Ukraine war, the Israel-Hamas war, peak global inflation, rising crude prices, and a consumption slowdown. The Nifty surpassed 21,000 for the first time, and the BSE Sensex exceeded 71,000 levels, both marking an 18% gain in CY23YTD. Notably, the Nifty Midcap index and Smallcap index outperformed, showing gains of approximately 43% and 52%, respectively, during the same period.
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