Book profits now or stay invested? Nilesh Shah's take
Book profits now or stay invested? Nilesh Shah's take
Nilesh Shah, MD, Kotak AMC, says many people depend upon their next generation and become a burden on them. It is important that we create financial security for every Indian through capital market participation whereby they can generate real return. How can you make a country rich when 93% of savings went into either below inflation or inflation return products? Only 7% went into above inflation return products. We have to ensure that the 7% keeps on increasing and Indians become wealthy.
For medium term and long-term investors, we can endlessly argue that markets are expensive. We can make a case that stock valuations are above that comfort zone. But when you have so much liquidity, both local and global, then is it wise to come out of the market or book your profits or not stay invested because liquidity can take this market higher before it peaks out?
Nilesh Shah: Undoubtedly markets can remain irrational more than you can remain solvent. And it is not that Indian markets barring few certain categories are looking at all-time high valuation or very expensive mode. Yes, one can say that Indian investors are like Indian cricket spectators. When the Indian cricket team is winning all the matches in T20, we are expecting them to go and win the World Cup.
The same way, Indian markets are also discounting all the positives and hoping that this trend will continue. Are we more optimistic about our markets? Answer is undoubtedly yes. But are we being irrational about our market barring few pockets? Answer is no.
How much of the strength in the market is local and which flows are purely global in nature? While we feel very happy about India, the bottom line here is that Nasdaq is at an all-time high, S&P is doing very well. So, the pillar on which equities are rallying is also global.
Nilesh Shah:
Undoubtedly, it is a combination of local as well as global. Global investors have been behaving in an erratic manner. One month they are buyers, two months they are sellers. They are sellers in one month, buyers in two months. But there have been net additional purchases over the last two-three years and that is how they have contributed to our markets. Obviously, the market is also expecting there will be no impact of geopolitical escalation on energy prices. The Fed will cut rates, so to some extent our markets are combining both local and global factors.
We understand that you were also part of the pre-budget meetings and consultations with the finance minister. Any colour on what we should expect in terms of the taxation, both for the capital markets and at an individual level because that is where all the hopes are.
Nilesh Shah: So, it was a one-way communication from our side, not two-way communication from their side. But we recommended the finance minister that you have done an excellent job and we, the mutual fund industry, are the biggest beneficiary of the great work done by the finance ministry. The vote on account laid the foundation for the rally in the market when people realised that the budget could be pro-growth in terms of investment and infrastructure and yet fiscally prudent. With RBI's additional dividend of almost Rs 1,23,000 crore over last year, the fiscal space has expanded. They can provide a budget which is vote on account, continued forward in terms of fiscal prudence as well as growth.
One recommendation from the mutual fund industry was that under the aegis of our regulator SEBI, we have done very good work on spreading financial awareness. And today we are seeing 4.5 crore investors securing their financial freedom through investment in mutual fund. But there is still a large portion who has not yet invested into financial instruments appropriately.
During FY21-23, mutual funds got about Rs 4 lakh crore flows; Rs 9 lakh crore or double of that money went into currency notes which are depreciating assets. So, we requested the finance minister to launch a copy of the Jan Dhan scheme which provided banking to every Indian, a similar Jan Nivesh Yojana which can create a push and a pull both for financial investment, let people secure their financial freedom through the capital market.
Ridham Desai last week said that if you look at Indian savers, less than 5% is in equities. A similar kind of thought is echoed by you and all the other market veterans. Can I say that this entire domestic flow coming into Indian equities is a multi-year flow and we are looking at least Rs 2,20,000-2,30,000 crore a year flow continuing for next four-five years?
Nilesh Shah: When we launched the SIP Day, we talked about a retail tsunami coming into the market and those were the dreams. We hope that one day it will become true well before we retire. Today, it is glad to see that 4.5 crore Indians are securing their financial freedom through mutual fund investment. People who started early are today enjoying the fruits. The returns on their portfolio are well beyond their expectations. Now, our focus is that we have got an early start. Now, we have to build the momentum. People lose money in Ponzi schemes. People lose money by investing in currency notes and cryptos and NFTs. People spend fortunes in the lottery. All these things do not create financial freedom for them.
Many people depend upon their next generation and become a burden on them. I think it is important that we create financial security for every Indian through capital market participation whereby they can generate real return. How can you make a country rich when 93% of savings went into either below inflation or inflation return products? Only 7% went into above inflation return products. We have to ensure that the 7% keeps on increasing and Indians become wealthy.
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