Uday Kotak sets the cat among the pigeons

In an interview to the Indian Express a few days ago, Uday Kotak of Kotak Mahindra Bank has called out the permabulls (you know who they are: those talking heads who are always on TV talking up their own investments) in the market. To a question about the surge of retail inflows into the markets, Mr. Kotak has a characteristically cautious response:

Uday Kotak: While we are in the right direction, I always worry about excesses. What’s the excess which worries me? Here we have got a wonderful situation where massive amounts of savings are moving to the financial savings. Within the financial savings space, (money flows) into mutual funds, unit linked schemes of insurance companies and directly into the equity markets. Money is coming to a broad funnel and it’s going into a narrow pipe where massive amount of Indian savers’ money is now going into few hundred stocks. And you come back to the question of how good is the governance of these companies. The amount of money that’s going into small and mid-cap stocks is something on which we have to ask tough questions. Is there a risk of a bubble?

The interviewers getting a sudden bout of panic (& possibly mentally fearing for their own portfolios) double checked by practically begging Mr. Kotak to say it wasn't really so.

Interviewer: Are you saying the market rally is a bubble and not based on fundamentals?

Uday Kotak: You’re pushing all this (money) into a narrow funnel which inevitably runs the risk of a bubble. Micro improving but the speed at which stock prices are going up is even faster. Micro is better and macro headwinds have started. The speed at which stock prices are going up is sheer money power.

Time will tell whether he proves to be prescient or alamist.