Market Watch | G Chokkalingam, Founder & Managing Director, Equinomics Research & Advisory on Market:
“In the last two days, almost seven lakh crore got wiped out till yesterday. This kind of tremors in the market is good, so that the pressure is not built up,” G Chokkalingam, Founder & Managing Director, Equinomics Research & Advisory.
Medium term that is at risk, the current market cap of Rs 268 lakh crore, even 0.5 percent would be about $17 billion and our market doesn’t have that kind of liquidity appetite if 0.5 percent of the selling comes to the market, he said.
“Having said that, I am not scared that there will be a crash till end of December or an end of current financial year that is March 2022. The main reason is that there’s a structural change in the market. People like you and me, who were in the market for you know, more than one decade or three decades, we 3 crore in number till 2014. Now, in the last 18 months, three crore new investors have come and last Monday, more than three, four lakh investors visited in a single day. So it’s like what happened to GameStop is happening here with the whole market. I’m not talking about the valuation, the new investors coming and rewriting the story of equity markets. So therefore, I believe the smallcap, midcap may not crash but one has to be very cautious about the valuation of individual scripts,” Chokkalingam said.
Historically, whenever smallcaps outperformed by more than 100 percent, since then it has corrected but because of new investors that might not get repeated at least till December, because economic fundamentals are strong, he said.
There is FDI robust inflow, $23 trillion global stimulus, a small part of that also be a big money for India. So a lot of good things are happening in the short term, but one could be careful about the medium term, he quickly added.
Also, one should be very cautious about the individual valuation of the stocks. “So put 30 percent in the institutional stocks, top 250 market cap, then the 30 percent in stocks whose valuations are comparable to pre-pandemic level, and then 30 percent, you go where there is value in momentum,” he said.
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