Signs of exuberance visible; tough time for first-time investors: White Oak’s Aashish Somaiyaa

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Halfway into 2021 – the year has already seen record inflows into mutual funds; millions of new Demat accounts added; historic highs for markets; and a flurry of IPOs in the making. Is this a time for exuberance or should investors employ caution? Now may not be the best time to enter equities, says Aashish P Somaiyaa, chief executive of investment management firm White Oak Capital Management. “It is a difficult time to start off for first-time investors. I think the best way to do it is to if you have a hundred bucks to start with, start with 10 bucks and go slow, go gradually,” he told Money9 in a video interview. Somaiyaa said while the famous Alan Greenspan-coinage of ‘irrational exuberance’ may not be in play today, there sure are some signs of exuberance nonetheless with oversubscribed IPOs.

Should you enter the market now?

Somaiyaa said he empathises with investors looking at starting their equity journey today, given the high valuation of the market. He said it is better to start when markets are down rather than at a time like now when market highs are making headlines.

He added that index investing may be best suited for those who don’t have a concrete goal and are not actively advised by financial advisors. “If we don’t know what to buy, you should buy the market. You can go with just Nifty 500. Maybe that’s the easiest place to start,” Somaiyaa said.

Are global macros worrisome?

US inflation and the possibility of increasing interest rates are a signal of economic activity picking up, making institutional investors flock from Indian markets. This is likely to result in a decline of Indian markets in the short run. “There would be turbulence, exchange rate fluctuations, and few days of negative news flow cannot be wished away. But taper is not a piece of bad news because overall there is a revival of the economy,” he said.

Indian events to define markets

According to Somaiyaa, three aspects are going to define the trajectory of the markets in the coming weeks. First, the retail stress in the housing sector keeping banks on the edge likely to ensue could be a dampener for the markets. Second, company earnings could well chart the path that markets would tread. “The best of results come early, and the not-so-great ones come at the fag end,” Somaiyaa said quoting an industry pun. Third, the next wave of Covid and India’s vaccination coverage would define the course of the markets.