Primary Issuances Needed Else Share Market Valuation Will Go Into Bubble Territory: JPMorgan's Rajiv Batra

Even as the Indian exchanges recorded the maximum listing attempts in September, JP Morgan's Rajiv Batra believes primary issuances are necessary for the secondary market to not reach bubble territory.

An asset bubble occurs when the price of an asset, such as stocks, bonds, real estate, or commodities, rises rapidly without underlying fundamentals to justify the price spike, according to Investopedia.

Rajiv Batra, Strategy Head, South East Asia, India at JP Morgan, told NDTV Profit on the sidelines of the Investor Summit that if India does not come up with primary issuances and everyone is chasing the same set of secondary market offerings, the Indian market will reach a price-to-earnings ratio of 40 very soon.

He also said primary issuances were necessary for competition among domestic, HNI, PMS, and AIFs. He noted the only player giving up their share was the promoter.

He said high valuations and promoter selling were not a problem because a diverse market with a share for all was necessary. "That is why the beta is lower and we are seeing resilience," he said.

Citing various conversations with investors, Batra said the most foolish thing any investor could have done is not to chase IPOs, QIP or blocks in the India market because it is a no-brainer strategy that one subscribes to these things.

This is because the six-month and 12-month performance of these has ranged from 30% to 150%, he said, terming it a momentum strategy. "If this continues for the next 12–18 months, the other set of foreign investors will keep on joining the bandwagon," he said.

According to him, foreign investors have largely come into issuances in both the primary and secondary markets as they don't have to chase liquidity at higher valuations.