By Aditya Raghunath
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.