Equity markets not in a serious bubble territory, says Uday Kotak

Amidst concerns of expensive valuations of small- and mid-caps, Uday Kotak, founder and director of Kotak Mahindra Bank, said that equity markets are not in bubble territory and can support sustained capital formation if the right checks are in place.

Speaking at a conference organised by the Securities and Exchange Board of India (Sebi) and National Institute of Securities Markets (NISM), Kotak said that speculation is a core part of the market and we need to balance the same.

“At this stage, we are nowhere near that risk. There are enough checks and balances in our system today. (Not right) to compare ourselves to serious bubble territory. I would say it is still frothy, a little bubbly but not out of control. This is my personal view. But as long as we keep a watch and manage it well, we can create a sustained capital formation going forward,” he said.

His comments come at a time when the smallcaps and midcaps have seen a sharp fall in the last three consecutive trades.

Kotak also urged that India should now take the battle on reserve currency.

“A time has come for us to foresee the next 10 or 20 years of India’s true growth and development. How can India look to improve its position on the currency side to get a larger positioning as a potential currency of trade,” he added.

Speaking at the same event, Ashishkumar Chauhan, chief executive officer and managing director of National Stock Exchange (NSE), urged small investors to be wary of the market if they cannot take the risks.

He added that the entry barrier for risky products should be higher and there could be guardrails.

"If derivatives are very risky, keep a very high lot size and high net worth to handle the risk. Create a regulatory framework for the guardrail," he said.

(Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd)