For the first time ever on Tuesday, the equity benchmark Nifty50 reached the historic five figure mark of 10,000 points. Amidst all the celebration and jubilation, ace market veterans Madhusudan Kela and Vallabh Bhansali advise caution, and counsel to invest for the longer term.
When asked about his views about nifty scaling the new peak, Madhu Kela, the market expert, advises said that a lot of doubts about valuation, earnings recovery and growth linger on even as Nifty edges past the magical figure, in conversation with CNBC TV 18. The renowned expert suggested that the markets have indeed returned phenomenally in the last one year, and this time when the market corrects, the fall will be bigger than expected. The market doyen sermonized that investors must not extrapolate the market returns of the last 2 years to the long run as several small cap, mid cap and select large cap funds have performed exceptionally in the last 2 years. The S&P BSE Smallcap index is up by more than 33% this year. Funds such as SBI Small and Midcap, DSP Blackrock Micro cap and Franklin India Smaller Companies funds have returned more than 25% in the year. The benchmark for Midcap funds, Nifty Freefloat Midcap 100 is up by more than 27% on a year to date basis. The Mirae Asset Emerging Bluechip Fund, IDFC Sterling Equity Fund, HDFC Mid Cap Opportunities have registered stellar performance in the year with returns more than 25%. Further, the expert warned investors to be very selective while investing in IPO’s and not just go with the flow. In light of the recent IPOs being oversubscribed by more than 250 times, this word of advice seems very timely. He sees the biggest froth in newly listed companies. He believes that there will be a rise in iin volatility in the next 2-3 years, and the investors should be on top of the markets in times of volatility. He advised a 5-6 year horizon while investing into the markets.
Vallabh Bhansali of Enam Securities, in conversation with CNBC TV -18, said there are always impending dangers when investors take a two to three year view. When asked specifically if the liquidity now is enough to overcome the valuation fears., he said that there has been constant flow of liquidity into the markets in the backdrop of structural reforms, and it will continue to push up the multiples. According to him, investors are now willing to invest for the long term, as this is a very important structural change. Amidst all the exuberance on the benchmark indices scaling new heights, will the market be sane enough to digest this word of caution?