Ajay Tyagi on why valuation can be the biggest trigger in market

So, investors should be aware that just because India is doing well, it doesn't mean that markets will continue to move only in one direction. As an investor, you must focus on quality, buy good companies run by good managers and those available at a good price. Retail investors have the luxury of taking a longer term view. They don't have to worry about 6-12 months performance or the volatility and so on and so forth.

“I guess, people made a lot of money after Covid and they are looking for avenues to invest. Even after this runup, many are sitting on a significant amount of cash. So, even now, the liquidity is not completely exhausted. I guess it is just the money which was probably printed during the Covid times, which is still making rounds.”

Has the market, then, become cheaper? Yes, and no.

It is essential to read and venture into spaces that can become very large, have global relevance, and have domestic tailwinds, says Prakash

The battle for dominance in the MSCI Emerging Markets Index between India and China hinges on sustained economic growth, reforms, demographic advantage, and challenges faced by China. However, potential hurdles include interest rate hikes, geopolitical tensions, market valuations, and challenges in the real estate, information technology, consumer goods, and pharmaceutical sectors.

We think DII flows have achieved critical mass, especially when we see the mutual fund systematic investment plans flows now above Rs 17,000 crore per month. We also see that 10% of incremental Employees Provident Fund Organisation (EPFO) flows becoming meaningful in Indian equity markets. Overall, we see these flows to be sustainable and have a probability of going up on both retail and institutional flows.

Founder and CEO of MarketsMojo, Dr. Mohit Batra, advises investors to not evaluate their investments on a year-to-year basis and instead use a time frame of 3 to 5 years. Batra believes that the Indian equity market will provide returns in the teens in 2023, with a Nifty target of 20,100. As for the crisis in Go First, Batra anticipates that the pent-up demand in the aviation sector will begin to cool off in the next three to six months. Batra suggests that investors should allocate 10 to 15% of their net worth in gold and silver.

At a time when it is not possible to find stocks that can be called “fairly valued” and forget “undervalued”, but the sentiment continues to be bullish, it is tough for retail investors to control their desire to buy stocks. The fact is that this market has been in an overvalued zone for quite some time, but as they say, liquidity and sentiment can ensure that market remains in that zone for longer than anyone expects. So, for investors, it would be wise to take exposure to stocks, where a sector the overall market size is very big or the sector has reached an inflection point where the market size will grow or they have an income stream that has an element of annuity. The reason why this strategy works is that even if the valuations are expensive at the time of buying stocks, steady growth in the industry helps in normalizing the valuations of individual stocks.

India remains well positioned in the longer term, despite the short-term risk of capital outflows prompted by investors wishing to lock in gains, according to Jonathan Schiessl, deputy CIO of Westminster Asset Management. Schiessl believes that while there is a degree of exuberance in the market, this particular period of selling-off is simply driven by investors looking to cash in on profits. He stressed that India has outperformed China recently, and risk of a trade war between the two is not new.

Investors make mistakes when they are exposed to extremes of market conditions/extremes of asset classes. Mistakes happen at extremes because of emotions and hence emotional reactions come into play.