Market Unlikely to Enter Long-Term Bear Phase Without Unexpected Shock: Kotak AMC’s Nilesh Shah
Introduction
Nilesh Shah : The Indian stock market has experienced significant corrections in recent months, leading investors to question whether the market is entering a prolonged bearish phase. However, according to Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Company (AMC), the market is unlikely to slip into a long-term bear phase unless an unexpected external shock occurs.
In an interview with Moneycontrol, Shah highlighted that past bear markets, such as those triggered by the US Subprime Crisis in 2008 and the COVID-19 pandemic, did not happen in a fair-valued market without an external trigger. He believes that, fundamentally, most large-cap, mid-cap, and small-cap stocks are currently at fair value—neither too cheap nor too expensive.
No Long-Term Bear Market Without a Major Shock
Market Sentiment and Fundamentals
Shah explained that in the short term, the market behaves like a voting machine, influenced by sentiment and liquidity flows. However, in the long term, it acts as a weighing machine, where fundamentals matter the most. Given the current fair valuation of stocks, a deep, prolonged bear market is improbable unless an unforeseen global or domestic crisis triggers panic selling.
He also pointed out that while markets have corrected sharply, this correction is healthy and normal, allowing investors to enter at more reasonable valuations.
Retail Investors Are More Mature Than Before
No Major Retail Exodus Expected
Retail investors have grown more mature over the years due to education, experience, and guidance from mutual fund distributors and SEBI’s investor awareness campaigns like Mutual Fund Sahi Hai. Despite short-term volatility, retail investors have learned to stay invested during downturns rather than panic-selling.
Shah emphasized that while retail speculators might leave the market during corrections, long-term investors have the ability to identify opportunities and invest strategically, even during downturns.
SIP Investments and Market Trends
Will SIP Investments Be Affected?
Shah believes that while Systematic Investment Plan (SIP) numbers may not increase significantly, they will remain stable with minor fluctuations. He noted that many investors rely on recent market trends to make investment decisions, which can lead to stopping SIPs during corrections if they lack proper financial guidance.
However, he strongly advised against timing the market, stating:
“Time in the market makes more money than timing the market. More people have lost money waiting for a correction than in the correction itself.”
Promoters May Increase Stake in Their Companies
Corporate Buybacks on the Horizon?
With stock valuations correcting, Shah expects many promoters to consider increasing their stakes in their respective companies. However, the taxation on corporate buybacks remains a challenge. He suggested that if a temporary exemption on buyback taxation is introduced, many companies may repurchase their own shares, signaling confidence in future growth.
Economic Growth Outlook for Q4FY25
Strong GDP Growth Expected
The Indian economy is expected to grow between 6.5% and 7% in Q4FY25, according to Shah. Factors supporting this strong economic momentum include:
- Government-led capital expenditure (Capex)
- Kumbh Mela and wedding season boosting consumption
- Strong kharif and rabi crop yields driving rural demand
Shah emphasized that India should focus on achieving double-digit GDP growth by further improving the ease of doing business and ensuring policy stability.
Top Sectors for Long-Term Investment
Betting on the Right Promoters
While identifying promising sectors, Shah believes that promoter quality matters more than sector trends. A bad promoter in a good sector will fail to create sustainable value. Investors should back visionary promoters who work hard and respect minority shareholders.
That said, he sees strong potential in:
- Banking & Financial Services – Due to rising credit demand and digital transformation
- Consumer Discretionary – Driven by increasing disposable income and urbanization
- Healthcare – Given the rising demand for healthcare services and innovation
Key Financial Ratios
| Metric | Current Market Condition |
|---|---|
| Nifty 50 P/E Ratio | Around fair value |
| Sensex P/E Ratio | Fairly valued |
| Mid-Cap Valuations | Neither cheap nor expensive |
| Small-Cap Valuations | At fair value |
| SIP Inflows | Expected to remain stable |
| Expected GDP Growth (Q4FY25) | 6.5% – 7% |
| Key Sectors to Watch | Banking, Consumer Discretionary, Healthcare |
Frequently Asked Questions (FAQs)
1. Is the Indian stock market entering a long-term bear phase?
No. According to Nilesh Shah, the market is at fair value, and long-term bear markets usually require an external shock like the 2008 financial crisis or COVID-19.
2. Should retail investors be worried about the market correction?
No. Retail investors have matured and should continue investing rather than trying to time the market. Long-term investing remains the best strategy.
3. Will SIP investments decline due to recent market volatility?
SIP numbers may not increase significantly, but they are expected to remain stable with minor corrections. Investors should focus on long-term wealth creation.
4. Will promoters start buying more shares in their companies?
Yes, many promoters may increase their stakes in their companies given the recent correction, provided there is a tax exemption on buybacks.
5. What is the GDP growth outlook for Q4FY25?
India’s GDP is expected to grow between 6.5% and 7%, driven by strong government spending, festival seasons, and robust rural demand.
6. Which sectors are expected to perform well in the next few years?
Sectors like banking, consumer discretionary, and healthcare are expected to outperform in the long run. However, investors should focus on quality promoters rather than just sector trends.
Conclusion
While the stock market has witnessed a sharp correction, a long-term bear phase is unlikely unless an unexpected global shock occurs. Investors should stay focused on fundamentals, avoid panic-selling, and continue investing through SIPs for long-term wealth creation. Promoters may increase their stake, and India’s economic growth remains strong, making it an exciting time for long-term investors.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.