With market bullish, irrationality can take over

Updated: Sep 28 2007, 04:24am hrs
Is the dream run on the Indian bourses sustainable We put the question to Raamdeo Agrawal, co-promoter of Motilal Oswal Securities (MOSt), who is valued in the community for his insight on issues related to equity research. His firm belief in value-investing, as practised by the Oracle of Omaha, Warren Buffett, and Charlie Munger, forms the core of MOSt investment philosophy. He is a member of the National Committee on Capital Markets of the Confederation of Indian Industry. Excerpts from an interview:

What is your view on the market right now Is the market showing over-enthusiasm or reflecting the India growth story

The market is in a very bullish mood. These are the times when rational decision making by investors become difficult and irrationality takes over.

What is it that is really driving the market right now

Global liquidity and India emerging as a very important market in global portfolios. This is driving foreign interest. Locally, insurance companies are lapping up all the blue chips.

Do you think that with the US Fed Reserve cutting their key interest rate by 50bps, the sub-prime issue has become a matter of the past

The US Fed has finally joined the forces to fight the sub-prime issue. Earlier, I thought the problem would last long, but it looks that markets have reconciled with it.

How do you see the role of retail investors during the pre-sub prime crisis and post sub-prime crisis What is your advice for retail investors

Investors must use every opportunity to buy undervalued stocks and sell overvalued stocks in the market frenzy.

In the last two years we witnessed three major crashes because of global factors. Don't you think the Indian market will continue to get impacted by global factors, thanks to FII dominance

The Indian capital markets are gaining importance in global investing. One cannot remain unaffected by global developments. It is a double-edged sword - it cuts both ways.

Compared to emerging markets, where does India stand in terms of valuation and corporate earnings How attractive is the Indian market to foreign investors

India should be compared only with the Chinese market because there are only two countries with consumer market of more than a billion population.

Now that the financial markets across the globe are getting closely integrated, to what extent can the Indian market escape from negative global cues and start reflecting the true India growth story

In any market, it is a survival of the fittest. Indian companies which grow faster than their counterparts in other parts of the world would eventually get better valuation. Thanks to Bloomberg, Internet and borderless capital markets, time is not far when Indians would also become global investors.