“One should learn from the mistakes he made in the past,” said Shah, Managing Director at Kotak Asset Management Company (AMC).
Talking about the sharp rise in the market, Shah said he was not surprised by the rapid 1,000-point move in Nifty50, which is the fastest such rally.
A 1,000 point jump in the index from 16,000 to 17,000 has a different meaning than a jump of 1,000 points from 5,000 level, he said.
“Markets are driven by sentiments and fundamentals,” Shah added. “Currently, sentiments are turning positive as the worst of Covid-19 is behind us and corporate earnings are improving on expected lines. Global cues have remained supportive.”
The market veteran said equity markets have emerged as the only option for retail investors to make money. Bank rates are at historic lows, gold is losing sheen and the bond market return has been in single digits.
Shah discarded the fact that foreign portfolio investors have remained net sellers in the equity markets recently. “The data only counts secondary market buying, whereas if you include primary markets, they have been net buyers.”
According to the data compiled by Kotak Asset Management, FPIs have investors over $31.3 billion (about Rs 2.25 lakh crore) in Indian equities between August 2021 and July 2021.
If everyone is buying, then who is selling? “The promoters,” Shah answered. “They are selling stakes by OFS, IPO, QIPs and other routes,” he added.
Shah believes that India is the best alternative to China, whose crackdown over tech companies is likely to increase domestic inflows. “This is the best fundamental bull market,” he added.
The fund manager remains optimistic on domestic equities. “The market may correct from here, but definitely will not crash, if the corporate earnings growth sustains in the coming future.”
However, he said that the current market is neither cheap nor expensive and suggested investors to allocate 50 per cent of their investment in equities based on their investment horizon and risk appetite.