The India Opportunity: India In Boom Phase For Small, Mid Caps, Says S Naren
People don't hold investments till long term when they invest in a boom market, says Naren.
Markets are in the boom phase for small and mid caps, according to veteran fund manager S Naren
"I define markets into five phases," Naren, chief investment officer at ICICI Prudential Asset Management Co., said during a discussion at BQ Prime's The India Opportunity Summit on July 13.
The first is bust like when Lehman Brothers collapsed, World Trade Centre was attacked and Covid broke out—that's the best time to invest, if "you have the guts to invest", he said.
The second phase is 'best', when there's no such crisis, but markets are in bad shape. The third phase is 'boring', when there are few notable happenings with moderate buying from foreign institutional investors, and moderate buying in mutual funds. The fourth is 'boom'--like now when small and mid caps are surging.
"What we've seen in boom phase is if you've invested, you normally don't make money in the medium term," Naren said. During the boom market, the medium term is the problem, he said.
In the short term, markets may go up, and in the long term India is a good structural story. "But normally, people don't hold till long term when they invest in a boom market."
The last phase is the bubble, and whoever invests then will lose money, he said. "In bubble phase, the market narrows. There'll be only a few stocks which go up."
Today, according to Naren, we're in the boom phase in only small and mid caps. "We are not in the boom phase in large-cap or multi-cap or flexi-cap."
"Where three-four year returns are very good, you have to be extremely careful," said Sailesh Bhan, chief investment officer, equity, Nippon India Mutual Fund, who was part of the discussion.
Watch the full conversation here: