Investors are concerned about the ongoing correction which has dragged the benchmark equity index BSE Sensex down by another 1,000 points intraday on Friday. The 30-share index traded 2.34 per cent lower at 57,419 at around 10.50 am (IST).
Overall, the equity index has lost more than 2,500 points in November so far. It was hovering above the 60,000-mark on November 1.
However, Nilesh Shah, managing director, Kotak Mahindra Asset Management believes investors have a great opportunity to enter the market. "If equities continue to correct, you can become overweight on equities after certain correction," he added.
In an interaction with Bombay Stock Exchange Brokers' Forum (BBF), he said for any market you need three things which include sentiments, money power and third fundamentals.
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Shah added that the local sentiment is positive, while global has taken a backseat. He further explained that sentiment about India is turning positive as its active cases are less than 1.50 lakh amid a rising pace in vaccination, which has recently crossed the 115 crore milestone.
"Life has become normal and economic activities are above pre-pandemic. Overall, the mood is positive and it was reflected in Diwali festive buying where retail sales went up by almost 60 per cent partly due to price increase and partly by a rise in demand," he said, adding there is one dark cloud that is emanating from the global side in terms of lockdowns.
Shah said Austria has returned to a full national lockdown, while Germany is about to announce the same to curb the COVID-19 pandemic. "This will impact global growth," he told Alok C Churiwala of BBF in the interaction.
Of late, rising cases of a new coronavirus variant in South Africa also spooked global markets.
While sharing his thoughts on the money power, Shah added that the local mutual funds, retail, high net worth investors, insurance and pension funds are net buyers of equities. However, promoters and foreign portfolio investors (FPI) have turned net sellers.
"Promoters are selling in the primary market. They are coming up with QIPs, IPO and offer for sale to reduce their stake. However, they will sell shares up to a price and the moment it will go down, they will not sell at discount. FPI will again turn buyers in equities soon," Shah said.
Overseas investors have sold shares worth Rs 3,447 crore in FY22 so far, data available with depository NSDL showed.
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He also highlighted that China market is looking attractive as compared to India after witnessing heavy correction.
On the selling side, he feels there is some amount of equilibrium and at lower valuation and prices both FPI and promoters will not sell and then buying by the domestic investors will make the bottom of the market and even pull the market up.
"I am not concerned from the money point of view. We are in a reasonable situation for some amount of correction," the money manager said.
Lastly, if fundamentals are expensive then there will be more selling than buying and vice versa. "At present, the street is expecting FY23 EPS coming at Rs 725-775. Roughly, it will be at Rs 750 on average. That will put the market 21 times FY30 earnings. It is not cheap and expensive also. Overall, the market is fairly valued at 19-21 times," he stated.
The market maven added that the real challenge for us is profit growth trajectory. "Select stocks that have sky-high valuation may see the correction. Apart from low floating and high valuations stocks, rest of the market is looking fairly priced," Shah said, adding long-term investors will make good money over the next three years. However, the return will not be as big as we saw in the past 20 months. At fair valuations, your return expectations have to be moderated," Shah noted.
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