Complacency biggest risk for investors in current market, says Nilesh Shah

Market Outlook

Shah says the current macroeconomic environment is filled with uncertainties and fundamentals can move in either direction in this market

Nilesh Shah

Nilesh Shah

Nilesh Shah, managing director, Kotak Mahindra Asset Management Company, has warned that complacency among investors is the biggest risk factor in the current volatile market.

“This is a market where fundamentals can move in either direction. In this kind of scenario, one cannot be complacent. We need to be grounded, we need to respect the market,” Shah told CNBC-TV18 in an interview on April 13.

Shah said the current macroeconomic environment was filled with uncertainties as crude oil prices, US interest rates, Indian interest rates and  US as well as domestic inflation could move in either direction in a short time and catch investors off guard.

Global equity markets have remained resilient despite multiple macroeconomic concerns including Russia’s invasion of Ukraine, multi-decade high inflation in advanced economies, a sharp shift in US Federal Reserve’s policy and a soaring crude.

Investors should avoid taking positions in the market by borrowing money and should strictly follow an asset allocation strategy, the veteran asset manager said.

Shah was also of the view that the domestic debt and equity markets had already discounted the possibility of the Reserve Bank of India raising interest rates later this year.

Also read: Inflation spike drives 10-year bond yields to fresh 3-year peak at 7.2%

The nearly 7 percent print on the Consumer Price Index for March forced investors to bring forward their expectations of when the central bank will raise interest rates. Shah said that the domestic bond market was already expecting the Monetary Policy Committee of the RBI to raise the repo rate four-to-five times going ahead.

The benchmark 10-year government bond yield surged 7.29 percent on April 13 from around 6.95 percent prior to the MPC’s monetary policy statement on April 8, reflecting the sharp revision in prices of government bonds after the RBI said that inflation has moved ahead of growth in its sequence of priorities.

“It will be a fluid situation but RBI’s move has been discounted in the debt and equity market. This is the time when all options are open,” Shah said.

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