India’s Largest Mutual Fund Company Cautions Against Euphoria in Stocks

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India’s Largest Mutual Fund Company Cautions Against Euphoria in Stocks
Credit: © Reuters.

By Aditya Raghunath

Investing.com -- Dinesh Balachandran, fund manager at SBI (NS: SBI ) Mutual Fund, at the launch of the SBI Balanced Advantage Fund, flagged off the unreal euphoria in Indian stock markets and cautioned retail investors.

He said, “Primary market activity is flashing warning signs. Such level of activity is normally associated with euphoria (in the market).”

He particularly pointed out warning signals for retail investors. “Retail investors are getting very excited about the market,” he said. He added, “People looking for instant gratification in this market are likely to be very disappointed. You can’t expect any more rerating in the market as valuations are at their peak.”

SBI Mutual Fund manages assets worth more than Rs 5 lakh crore. Balachandran doesn’t believe that the market will continue to give the kind of numbers it has since March 2020.

He said that returns from now will be driven by growth in corporate earnings. As the economy opens up, companies that manage to do better will drive numbers.

Initial signs of Balachandran’s warnings are already on display in the IPO market. The last two weeks have seen grey market premiums (GMPs) for IPOs fall down for stocks by a huge margin.

GMP for Devyani International, the largest franchisee for brands like KFC, Pizza Hut and Costa Coffee, has fallen from Rs 75 when the IPO subscription was on to Rs 45 on August 11. Windlas Biotech has seen its IPO fall 50% from Rs 80 to Rs 40. Exxaro Tiles didn’t have a high GMP to begin with, just Rs 14 - Rs 15 and even that has fallen to Rs 8 – Rs 9.

Krsnaa Diagnostics has seen its GMP fall from Rs 435 to Rs 270 while CarTrade Tech has seen a huge fall from Rs 700 to less than Rs 200.

 

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  • satyabrata nayak @satyabrata nayak
    mkt is over bought, big correction will come soon
    Like 2
  • Ajay Uppal @Ajay Uppal
    I think it is time that all retail investors need to liquidate their Mutual funds investment and wait for 3-6 months to reinvest at lower levels.
    Like 5
  • Ajay Uppal @Ajay Uppal
    More than retail investors, DIIs need to understand the concern who keep investing even on days when FIIs are selling and Valuations are at peak.
    Like 1
    • Adesh Shetty @Adesh Shetty
      What do mean? Dii should bt only when fii buy?
      Like 0
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  • Hitesh Gala @Hitesh Gala
    Its so obvious. Fund managers r too slow sometimes
    Like 0
  • Tarang Shah @Tarang Shah
    Happy realization! Artificial and a BIG BUBBLE!!
    Like 1

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