Experts' caution on market's long surge

Till the time there is improvement at ground level in macro economic parameters, stocks will remain vulnerable

Following a 25% rally in the market this year, some experts are sounding a caution, fearing correction or consolidation in the remaining part of the year.

Till the time there is improvement at the ground level in macro economic parameters, stocks will remain vulnerable, say analysts.

"I have been cautious for some time. There could be corrections but it's difficult to say, looking at the strong liquidity we have been witnessing for the past few months. I believe we are not out of the woods," said Andrew Holland, chief executive officer, Ambit Investment Advisors.

The Indian market has been witnessing robust flows from foreign investors this year. Foreign institutional investors have pumped $12 billion into the stock market, one of the highest in the region.

"Globally, the scenario could turn negative and India would see an impact. In Europe, Mario Draghi (head of the European Central Bank) has said he would do whatever it takes. Though from a longer perspective, say three years, I am bullish and would advise investors to identify the right companies, with good management, and not to worry about the timing," adds Holland.

Lately, domestic investors have joined the party, buying stocks aggressively in the past two months. In equity mutual funds alone, there have been Rs 20,000 crore of net inflows. Such a high scale was earlier seen during the peaks of 2007-08, before the crash.

There could be short term corrections but if inflow remain strong, the downside will be limited, say experts.

"You will see corrections on the way. The markets might get disappointed if the government doesn't meet expectations at the pace as one expects," said U R Bhat, managing director of Dalton Capital Advisors.

Experts believe investors should temper their expectations.

"The unprecedented returns over the past eight to 10 months have built up huge expectations in the minds of investors. They should moderate their return expectations. We are cautiously bullish on equities," said S Naren, chief investment officer (CIO) of ICICI Prudential MF.

Fund managers also say that finding value in the market will become increasingly difficult. "The easy money in the market is no longer available with the sharp rally we have witnessed in beaten-down stocks," said Mahesh Patil, co-CIO at Birla Sun Life AMC, in a recent interaction.