Home >News >India >Covid vaccination upheaval to cause volatility in 2021, says Kotak's Nilesh Shah

MUMBAI: Kotak Mahindra Asset Management group president and managing director Nilesh Shah sees the markets in 2021 as being marked by volatility as the world, in general, and the country, in particular, goes about vaccinating its citizens.

“Equity markets have done the unexpected as they recovered from the March lows. But 2021 will be marked by volatility on account of covid-19 vaccination. “There are doubts around the effectiveness of the vaccine and implementation of the vaccination drive, this may result in some volatility in 2021, Shah, one of the foremost voices on markets, said. He was speaking at the annual media roundtable of Kotak MF.

Indian equity markets have shown a robust recovery and have ended 2020 at 84% above the March lows. The recovery in the stock markets have been supported by three factors-- robust flows from foreign portfolio investors (FPI), fundamentals and sentiments.

FPIs bought 60,000 crore in equity in 2020. Retail flows were also robust. As per data from Securities and Exchange Board of India (Sebi), 4.9 million demat accounts were opened in the last calendar year, the highest in almost a decade and a 22.5% increase from the previous year. Total demat accounts at the end of 2020 came at 40.8 million.

Improvement in fundamentals, as shown by the better-than-expected results in September quarter, has also helped improve the market sentiments.

“Going forward our focus will be on two factors-- inflation and corporate earnings, to ascertain the market direction," said Shah.

“If earning momentum sustains, any correction will be temporary but if it doesn’t, then any rally will be temporary," he added.

Inflation can also play a spoilsport in the current rally, believes Shah. “A surge in inflation could lead to central banks around the globe cut the liquidity which can impact asset prices including equities," said Shah.

There are concerns around the rising valuations of the equity market. Shah believes stocks are at the higher end of the valuations but there is no bubble. He did caution investors and advised them to follow a balanced approach. “Investors should not leverage in this market and should not be overweight on equities at this point," said Shah.

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