Samvat 2078: A defining year for market, phenomenal participation by retail investors, says Raamdeo Agrawal

The market saw profit booking after beginning Tuesday's session higher following positive global cues. The 50-scrip Nifty benchmark oscillated around the 18,000 mark. Gains in auto, realty and power shares were offset by losses in pharma and metal scrips. Broader markets outperformed the headline indices, with strong gains in midcap shares.

In this special episode of Samvat 2078, CNBC-TV18’s Anuj Singhal spoke to two special guests: Manish Chokhani, Director of Enam Holdings, and Raamdeo Agrawal, Chairman and Co-Founder of Motilal Oswal Financial Services. The market masters discuss where the market is headed now, and where to invest in Samvat 2078.

Talking about retail participation in the market, Agrawal said: “This year has been a very defining year, in a way that apart from the general recovery and whatever has happened in the stock market, liquidity and interest rates, one of the most distinctive features maybe, because I belong to this particular community, is participation by retail (investors).”

“The number of account holders in 2007 was 10 million; the demat accounts were just about 10 million in 2007. It took five years to double to 20 million in 2012 and then in 2020, it became 40 (million). It took another eight years, so about nine percent compounded, and now in 2021, it became 55 million in the last 12 months," he added.

In September 2021, the number has crossed 70 million, and it took one and a half years for the number to reach that level from 40 million, he said.

"So this is a structural shift in the market and we must not ignore this; the policymakers should not ignore this. It is extremely powerful and it is going to have real long-term repercussions in the markets and work importantly in the economy, if harnessed well,” the market veteran added.

Enam Holdings' Chokhani believes it is a bit too early to say whether the market is peaking out. "It has run ahead of itself. It is a normal economic expansion that is happening and like in all new cycles, you started with both the central bank as well as the government unleashing whatever they could to revive the economy,” he said.

"So you have the lowest possible interest rates and the loosest possible fiscal stance that the country can have. The way the corporate sector balance sheets have got cleaned up with the unprecedented gush of profits and money... it is natural that the markets are excited," he said.

“This whole economic cycle is in a way started, the government's balance sheet is looking better because tax collections are running ahead of themselves; we just saw GST at an unprecedented Rs 1,30,000 crore a month... all the signals are now there that the economic expansion is going to really gather pace,” he added.

While one is always cautious about corrections, it is not right to say the bull market will end, and turn to a bear market very quickly, leading to people getting burned, Chokhani said.

It is the nature of markets that investors cannot all win, he explained. "Someone will win, someone will lose, it is the nature of capitalism. The good news is they are all youngsters and it is better to make your losses at a young age than for oldies like us to take losses and live with them," he said.

Speaking on digital companies, Motilal Oswal Financial Services' Agrawal said, “Lots of digital companies will come that might be loss making right now but in next 4-5  years could become seriously large profit making companies. The ones that will make profit, of course, will go from the current listing, exorbitant listing to even much higher levels,” he said.

In a well performing economy, there can be a number of stories, which makes it difficult to say which ones will do well. Credit expansion and credit cost reduction could be a reason for market movement, he said.

“As economic picks up, we can say 50-70 percent credit expansion and credit cost reduction of another 15-17 percent every year, it can expand profitability to unprecedented levels and we can see a major rally in the finances. So we don’t know; there can be lot of stories in a well performing economy,” Agrawal added.

Speaking on commodities, Chokhani said: “Commodity stocks did very well because they were very, very depressed last year. We still are actually very cheap commodity producers and with the level of profit, which has come, the multiples on these companies have naturally compressed to 3-4 times EV-EBITDA. So they are not expensive.”

“But no one knows how long the supply shock continues and whether the prices for commodities will stay as elevated as they are. So there is certainly room for some caution on commodities because no one can predict.”