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How long will the latest bull run last? Nilesh Shah answers


“We are at a stage where we believe there will be positive flows from FPIs. They may not be buyers everyday from here onwards, but certainly their selling intensity will get reduced significantly and they will turn buyers,” says Nilesh Shah, MD, Kotak AMC.



Look at the bull run. Do you think it will last for a while? Many believe this is just a short one before we see yet another pause but how are you prepping for this bull run?
This is a pullback or bull run depending upon two things; so far, the results which have come bearing a few exceptions in the IT and oil and gas sectors, are by and large ahead of investor expectations. While the aggregate numbers may not look as impressive, in the small to midcap segments, the profitability and the guidance is above expectation.

Second, we have also started seeing flows coming back from FPIs. There are not many IPOs right now. We are seeing local investors led by institutional as well as retail buying. When FPIs come to buy, then even a small amount of buying can influence prices. It is a very tricky market because both flows and fundamentals are supporting pullbacks. Let us hope and pray that oil prices remain on the softer side so that this bull run can get prolonged.


You mentioned FII flows, strength of DII flows. When the Indian market went down, there was a lot of pessimism. That is getting corrected. So, is underweight becoming a neutral?
FPIs were selling because the Indian market was expensive compared to the rest of the world. We were valued at double the others in the peer group. Second, FPIs also had made profits in India, compared to markets like Russia or China or South Africa where they were generally in losses.

Third, India was the only market where they were getting an exit. If they tried selling China or South Africa, their losses would have widened even more. Now they are at a tricky point. Do they continue to sell a profitable trade or do they cut their losses and come back to invest into the world’s fastest growing major economy?

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When one is overweight India, one can afford to trim the overweight and become neutral weight, but in a performing market, very few fund managers will be able to remain underweight India. That is where we believe a little bit of frustration trade is emerging. They have sold because we were expensive because they had a lot of profit over here. They were getting an easy exit. Now that trade is coming to an end and despite their massive selling, markets have not corrected much.

With their limited buying, markets are bouncing back quickly. Now what do they do? Should they become overweight? Even in MSCI, there are certain developments which can happen. For example, in the FTSE Index, Korea has been upgraded from emerging market to developed market. If that happens, there will be an increase in India’s weightage in MSCI.

There is a possibility that

on merger can become part of MSCI, like the earlier merged company HDFC. If that happens, India’s weight can go up in MSCI and if we are already equal to marginal underweight, then that trade can cast a lot of pressure on fund managers. We are at a stage where we believe there will be positive flows from FPIs. They may not be buyers everyday from here onwards, but certainly their selling intensity will get reduced significantly and they will turn buyers.



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