Alpha Moguls | Markets Won’t Top Off Anytime Soon, Says Basant Maheshwari

Stock markets are unlikely to hit a ceiling as central banks will keep injecting liquidity in the financial system, according to veteran investor Basant Maheshwari.“Most markets top off in the absence of liquidity,” Maheshwari, co-founder at Basant Maheshwari Wealth Advisers, told BloombergQuint on the latest episode of the special series Alpha Moguls. “This liquidity is not going to stop in the near future. So, I don’t think the markets are going to top off anytime soon.”Maheshwari stressed that when assessing the market from a medium-term perspective, investors should look at liquidity levels in the system instead of zooming in on earnings and market value.He equated the liquidity aspect in a market to cycling, where if you stop pedalling, you fall. That, according to him, is nowhere near happening. “If there’s a cyclist around and you tell them that the moment you stop pedalling, you’re going to fall. Mark my word, he will say: Don’t worry, mate, I’m not going to stop pedalling.”Drawing on U.S. Federal Reserve’s new approach to inflation, wherein the central bank will allow prices to run over its long-held 2% target, Maheshwari said that higher inflation is not necessarily a bad thing for the markets and liquidity. “I will be greatly happy if inflation hits 2.5% because that would mean there is some demand coming at the end of the game. I don’t think this liquidity is going to stop anytime soon.”Eventually, he said investors should look at markets from an earnings perspective only if they have a three-year view. “If you have a three-month view, it’s liquidity and if you have a three-hour view, it’s sentiments and emotions.”Maheshwari echoes a lot of other market participants in suggesting large-cap stocks and market leaders over mid- and small caps. According to him, stock prices are no longer just contingent on earnings but are now slaves to market share.“We don’t think there is any logic to just find a company because it’s a small-cap or a mid-cap unless it is the leader in its sector,” he said, cautioning against bidding on such stocks compulsively. “If it’s not a leader of that sector, the rally will always be short, it will be truncated. If it is a leader in its space, then obviously you could be very sure that the rally is going to continue for the next 6-7-8 years.”It’s essential to cherry-pick high-quality stocks while building your portfolio, Maheshwari said. “Concentration with low-quality stocks is a perfect recipe for disaster.”Maheshwari is bullish on lenders and expects financials to lead the post-pandemic recovery. “We think financials is the way to go,” he said. “I think the biggest rally in the post-pandemic environment will be in the financials.”Besides, Maheshwari said technology and rural-focused companies will dominate stock indices over the next five years. “Tremendous amount of changes are waiting to happen. If they are executed well, then over the next 18 months the biggest money would be made in these kinds of companies.”

Alpha Moguls | Markets Won’t Top Off Anytime Soon, Says Basant Maheshwari

Seasoned investor Basant Maheshwari on his view of the markets, the post-pandemic recovery and sectors he’s bullish on.

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