Overheated markets? 'Expect 5% correction'

'12250 should be considered a reasonable level to re-enter the market.'

"The market is not overvalued in terms of the fundamentals, but we believe the market sentiment is at the peak of optimism and an adjustment of it is more likely," Ashis Biswas, Head of Product-Quantitative Research, CapitalVia Global Research, tells Prasanna D Zore/Rediff.com.

How do you look at the sharp V-shaped recovery in the Nifty and Sensex? Both the bellwethers are trading above their all-time highs now.

This recovery is primarily because of the improving consumer demand followed by the recovery in business investment.

Gradually as the investors became more knowledgeable about the situation related to the COVID-19 pandemic, the sentiment started to adjust in a positive way.

The sharp V-shaped recovery is an adjustment of the initial over-reaction as the information was less during the time when COVID-19 initially started to spread over the world.

Given the all-time highs that the two indices have hit in the backdrop of the pandemic and the economic slowdown it created, do you think the markets are overvalued at current levels?

We do not think the market is overvalued in terms of the fundamentals, but we believe the market sentiment is at the peak of optimism and an adjustment of it is more likely.

How big or small could this adjustment be? Should investors look at Thursday's fall as healthy profit booking or do you think the markets are overstretched and poised for a decent correction?

We expect a sideways correction rather than a sharp correction this time. Investors should not expect a significant discount this time.

What could be the quantum of correction given that the indices have been on a one-way ride up since March 24, 2020?

As said, it will be more like sideways correction and a 5 per cent correction or say Nifty level of 12250 should be considered a reasonable price to re-enter into the market.

Where do you see value in this market: Small-caps, mid-caps, or large caps?

We believe in large-cap companies. Given the fact that the companies are coping with an adverse situation, blue-chip large caps will get over it first because of the advantage of their scale and spread they enjoy.

What would be your advice to retail investors given the momentum that the market finds itself in currently? Is it time for caution or should they buy the dips?

Retail investors should never try to time the market; they will lose a lot of money trying to do so. They should look for systemic investment route spread over the regular interval in a well-thought portfolio of stocks.

What would be your picks for Samvat 2077?

Financials, IT majors, and large-cap pharma companies in these sectors look bullish.

Our advice is investors should look for opportunities in these sectors.

HDFC Bank, Divi's Labs, and TCS are three stocks that will continue to do well going ahead.

Where do you see the market by the time we prepare ourselves for next Diwali?

The best-case scenario is that Nifty will be at 15000 level by next Diwali

Your advice for retail investors about investing and trading./strong>

A retail investor should try doing less while investing and trading. By this we mean they should seek for investment in a well-designed portfolio of stocks in a systematic way and never should try to time the market.