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Investors should be wary of the V-shaped rebound in the nation’s equities market: Jefferies
Investors should be wary of the V-shaped rebound in the nation’s equities market: Jefferies

Don't rush to buy stocks, top Indian private bank asks clients

  • Kotak isn’t alone in advising caution
  • However, it doesn’t recommend selling out of the Indian stock market either

The top investment adviser to rich Indians is asking its wealthy clients to desist from loading up on equities even as the nation’s stock indexes get back into bull territory.

“We are maintaining the view that this is a very uncertain environment, and hence, investors must not make impulsive decisions," Shobhit Mathur, a director at Kotak Investment Advisors Ltd., said in an interview. “We are asking clients to keep a close watch on the situation for signs of improvement or worsening."

Fear and Greed indicator shows investors are craving to buy India shares again
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Fear and Greed indicator shows investors are craving to buy India shares again

Indian equities entered technical bull market zone last week as India’s policy makers ramped up stimulus along with peers around the world to contain the fallout of virus pandemic. While an indicator of volatility surged to a record last month as the nation’s equities witnessed the worst slump in 12 years, investors’ fear of further losses has since abated due to the support measures and the lure of cheap valuations.

Kotak isn’t alone in advising caution. Investors should be wary of the V-shaped rebound in the nation’s equities market as an analysis of past bear markets shows they typically plumb multiple lows before recovering, according to a note from Jefferies Financial Group Inc. Kotak Investment Advisors guides clients of Kotak Wealth -- India’s largest private bank by assets under management -- on investments of about $39 billion.

Mathur doesn’t recommend selling out of the Indian stock market either.

Indian equity rebound may be due for a breather if history is any guide
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Indian equity rebound may be due for a breather if history is any guide

A change in the cautious stance will be made only after the pace of growth in confirmed cases slows or as testing kits to help in quicker identification of cases are made widely available in the country, Mathur said. Discovery of any medicines that will help in controlling the pandemic is another factor that the wealth manager will watch out for before asking clients to add to equities.

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