Country’s top banker Uday Kotak has cautioned over the recent surge in stocks. The Vice-Chairman of Kotak Mahindra Bank has said that massive amount of Indian savers’ money has been going into a few hundred stocks. Kotak has also said that the recent surge in stocks raises questions as to whether this poses the risk of a ‘bubble’. “While we are in the right direction, I always worry about excesses. What’s the excess which worries me? Here we have got a wonderful situation where massive amounts of savings are moving to the financial savings,” Kotak was quoted as saying by Indian Express.
“Within the financial savings space, (money flows) into mutual funds, unit-linked schemes of insurance companies and directly into the equity markets. Money is coming through a broad funnel and it’s going into a narrow pipe… massive amount of Indian savers’ money is now going into a few hundred stocks. And you come back to the question of how good is the governance of these companies. The amount of money that’s going into small and mid-cap stocks is something on which we have to ask tough questions. Is there a risk of a bubble?” Kotak wondered.
Kotak, whose $10.3 billion fortune makes him the eighth-richest person in India and the wealthiest banker in Asia, held about 30 percent in Kotak Mahindra Bank as of end-September, which is worth $9 billion based on current prices, according to report.
Kotak has headed a Sebi committee which submitted a report last year on changes in corporate governance rules for listed firms, said, “Keep in mind now you have EPFO money, insurance money, pension, investors’ and savers’ money. People think nothing can go wrong. I would increase my level of alert from the policy point of view and dramatically improve the level of governance and transparency.” “You’re pushing all this (money) into a narrow funnel which inevitably runs the risk of a bubble. Micro is improving but the speed at which stock prices are going up is even faster… The speed at which stock prices are going up is sheer money power,” he said.
Raising concern over the high level of foreign ownership in top private sector banks, Kotak said that foreign investors are benefiting from it. Citing the example of HDFC, he said, “More than 80 per cent (of HDFC) is foreign owned. Here’s a company whose core business is money from retail savers – Indian house owners. And of the entire gain made by that company, 80 per cent belongs to foreign investors.”
It has been learnt that Kotak is setting up an office to invest in assets including private equity, stocks and real estate worldwide. “The funds will be deployed in asset classes other than debt and cryptocurrencies,” Venkat Subramanian, who will manage the family office, said. “We will also stay clear of any investment opportunities that will bring us in direct competition with the bank.” While Subramanian didn’t disclose a figure, Kotak has about $1.2 billion in cash and investable assets, according to the Bloomberg Billionaires Index. Most of the money was raised when he cut his stake in the bank to meet regulatory requirements.