
Should you stay put or lock in some profits? This question has been troubling investors after the record-breaking rally on Dalal Street over the past 14 trading sessions.
The 50-share NSE Nifty index, which declined nearly 150 points in the morning trade, had surged by 4.7% from August 14 to September 3. Analysts suggest that subdued global markets and overvaluation in certain pockets have dampened market sentiment on September 4.
The 30-share BSE Sensex was also down over 400 points around the same time.
Value fund managers and market watchers hinted that one should keep some cash ready to lap up opportunity at better valuations. S Naren, ED and CIO, ICICI Prudential AMC says, “At this point in time, there is no cheap area in the market. Retail sentiment, which is extremely positive on direct equity and derivatives, is more worrying to us than anything else.”
ICICI Prudential Value Discovery Fund, which has delivered 21.09% CAGR return to investors in the past 20 years, held 12.95% cash as of August 30, 2024. “The journey of value investing in India demands patience and conviction,” says Naren.
Without disclosing the figure, Siddhartha Bhaiya, CIO, Aequitas investments also says that they are holding a meaningful amount of cash. He explained that markets are frothy, considering the mismatch between recent earnings and the rally in select stocks.
He also said that enough has been written about retail participation in the F&O space, where most are ending up losing money.
“This kind of euphoria has always led to a huge correction and disappointment for many years in retail, says Bhaiya.
Another portfolio manager Pawan Bharaddia, Co-founder, Equitree Capital says they are sitting on about 14% cash right now, citing high valuation in some pockets.
However, he thinks that there are enough opportunities available at reasonable valuations. The market watcher is bullish on engineering, manufacturing, infra, ancillaries, and select consumption plays.
A look at the Sensex and broader indices BSE MidCap and BSE SmallCap, which are hovering at their record high levels, shows an optimistic picture of the stock market. However, data shows that 65% of stocks in these indices have plunged by double digits from their respective 52-week highs.
“We believe headline indices may also see some correction,” says Bharaddia.
Trivesh D, COO, Tradejini, who has exited 25-30% of his positions, says, “The market looks overvalued right now and given the ongoing volatility, I am not comfortable investing more until valuations come down to levels where I feel more confident.”
Sanjay Bembalkar, Co-Head Equity, Union Asset Management Company says, “Our inhouse Union Fair Value Spectrum indicator is indicating markets are in modest zone indicating expensiveness of markets, and advocates investors should be cautious about valuations.”
Since markets are trading at record-high levels, he finds limited value pockets in the market. “Certain pockets of banks, NBFCs, oil & gas companies offer absolute value proposition while telecom, large-cap IT and rural-focused consumption discretionary plays offer relative value in this market.”
Rajesh Bhatia, CIO, ITI MF told Business Today that they do not believe in taking aggressive cash calls. “With our approach of bottom-up stock picking, we endeavour to find opportunities which could generate potential value for our clients,” he says.
Bhatia remains positive on equities in the near term. “India is currently enjoying the confluence of the macro and micro tailwinds with around 7% GDP growth, moderating inflation prints, range-bound crude prices, easing 10-year G-sec yield, stable currency and resilient corporate earnings. We continue to believe that the investment environment going forward would be a “stock picker’s market” and would separate the men from the boys,” he says.
Rakesh Parekh, MD & Co-head, Portfolio Management Services at JM Financial says, “We are sitting on around 3-5% cash across our discretionary portfolios. Indian economy and markets will provide tremendous scope for growth and wealth creation in the coming years.”
Parekh is positive on India centric sectors such as capex, industrials, energy transition, financials and the broader domestic consumption themes including auto, travel and tourism and FMCG.