Though the current bull run in the capital market looks ‘extremely tempting’, Uday Kotak, Executive Vice-Chairman and Managing Director, Kotak Mahindra Bank, feels investors should be a little cautious as stock prices are moving up.

“Organised savings are chasing limited supply of stocks. Keeping aside the valuations and earnings argument, the factor that worries me is debt instruments are being perceived as high risk and that investors are shifting from debt to equity, which is being perceived safer in comparison.

“Fundamentally, something is amiss here. What appears to be too good to be true, usually is!” said Kotak in his New Year’s message to Kotak Group employees.

Debt instruments are being perceived as high risk in view of hardening of interest rates and the resulting erosion in value of the instrument. Referring to the current bull run in both primary and secondary markets, the Kotak Mahindra Bank (KMB) chief said the key question to ask is “Is our economy really booming?”

He elaborated that “The (BSE) Sensex is at a new high of 34,000 and we saw over ₹1,76,000 crore being raised via IPOs and follow-ons in CY2017. A healthy and vibrant financial market is good, but what is equally critical for an economy’s health is capital formation and job creation.”

Observing that both India and China were developing nations till the early 60s and shared similar GDP figures, including per capita GDP, Kotak said. “Fast forward to the current millennium. As of 2016 (latest available update), India’s per capita GDP is around $1,800 while that of China is around $8,123 and that of developed nations is in the $30,000 range.”

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