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Evergrande crisis can be catalyst for market correction: Nilesh Shah

The Evergrande crisis is being referred to it as China's Lehman moment. How will this event affect India markets? Listen to this interview to know what Kotak Mahindra AMC's MD Nilesh Shah thinks

Markets | Evergrande | Nifty

Puneet Wadhwa  |  New Delhi 

It has been a topsy-turvy week for the global equity markets, having to deal with the crisis in China. Will this event prove to be a catalyst triggering a market correction? Or is the worst over? In this exclusive interview with Puneet Wadhwa, Kotak Mahindra AMC Managing Director Nilesh Shah answers all these questions.

Edited excerpts:

Concerns around China’s crisis over now?

  • more of a China problem than a global one
  • It’s China's ‘Lehman Brothers moment’
  • No global contagion, only a temporary setback
  • Some impact: Real estate slowdown, metal stocks to be hit

Will Evergrande ghost haunt global financial again?

  • Difficult to predict market sentiment
  • Events like Evergrande can act as a catalyst for market correction

Where will be after 6 months – 15,000 or 20,000?

  • Indian are fairly valued
  • Corporate results good, Covid cases dropping, ample money flowing
  • Evergrande crisis may force investors to look at India as alternative to China

Biggest risk to markets: surplus liquidity, inflation or retail investor frenzy?

  • None of these are risks
  • People sceptical about markets, but still want to invest
  • Indian market’s fundamentals should be a worry
  • We have a good opportunity to narrow economic gap with China
  • If PLI scheme delivers, we may well become manufacturer to the world
  • Investors looking for growth will then come to India

What about the opportunity the US-China trade war gave?

  • China is competitive; exporting more now than before pandemic
  • India needs to leverage its strengths sector by sector

US Fed has indicated a taper. Can global equity markets also take a breather?

  • Excessive liquidity has created excessive valuation in asset classes like cryptos
  • No such excess in the listed company/stock universe
  • First impact of liquidity taper will be on NFT market, cryptos, unlisted equities
  • The listed/stock market universe will be last to be impacted

Should investors look at debt segment instead of equities?

  • Debt was an option in March 2020 as well
  • Investors must follow asset allocation

What should be proportion for allocation to each asset class?

  • Depends on life goals and risk profile
  • Investment opportunities in the current market?
  • Looking at an equal allocation between large, mid-and small-caps
  • Some themes that will run long –
  1. Financialisation of savings: Beneficial for banks, NBFCs, AMCs, insurers, fintechs
  2. Export-oriented plays: Pharma, IT
  3. Industrial & engineering: Capex-driven play for the next 3-5 years

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First Published: Fri, September 24 2021. 12:06 IST