Mkts polarised into bubble-like and comfortable valuations: MF CIOs

India's equity markets are currently polarised into small and midcap segments that exhibit bubble-like valuations, and other areas which offer comfortable valuations, chief investment officers (CIOs) of top mutual funds said at Business Standard BFSI Insight Summit in Mumbai on Thursday.

- JADEN MATHEW PAUL & SUNDAR SETHURAMAN

They noted that although the markets have retreated from their peaks, earnings growth expectations have also moderated, effectively neutralising the impact on valuations.

"The trouble with the bubble is you will only know when it bursts. Certain segments are good and sensibly priced, but nothing is cheap in the market. The problem is that the bubble may not only be in valuations but also in investors' minds," said Sailesh Raj Bhan, chief information officer (CIO) - Equity, Nippon India MF.

"A lot of people are coming in with unreal returns. And if you look at the allocation of money in the last 6-9 months in mutual funds, a huge amount of money has gone into sector funds which have done well in the past few years," he said.

When more money chases less amount of equity in the market, there is always a valuation challenge, he added.

"The second question is on the promoter side, promoter selling. The promoters are finding their valuations so expensive that they want to reduce their money, and what they are doing with this money is investing in mutual funds so that they can diversify," said Bhan.

Mahesh Patil, CIO, Aditya Birla Sun Life Mutual Fund, said valuations were elevated in the small and midcap space.