Arvind Sanger, managing partner of Geosphere Capital Management, on Thursday, said that a lot of big initial public offerings (IPOs) are sucking out liquidity from the market.

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“I am concerned about both time and size correction. There are a lot of big IPOs that are sopping up liquidity in the market and if they do get an inflation scare, that’s going to cause a bit of a risk-off globally and India is certainly no exception even if the growth outlook, in the medium-term, looks reasonably good,” Sanger said, in an interview to CNBC-TV18.

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According to him, inflation level in the US is far more than what we would see in a normal recovery. “The reality is, a lot of retail investors have discovered online trading that is whipping money around. And some of that easy money, as it comes out, could cause some correction. Is it the end of the cycle? Is it something that investors should hunker down for? No. But we have taken some exposure down and we are waiting for a pullback to get better buying opportunities because we do believe that this inflation scare will prove to be more than one day or one-week wonder and if it lasts for a while then there could be some downward pressure on equities,” said Sanger.

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He further said, “The reason that inflation matters so much right now is because the Fed has been super dovish till now. This suggests that the Fed has to remove its accommodative policy and removal of that accommodative policy means that the pace of normalization of their buying is going to go away, tapering as it is called and the interest rate cycle is going to start moving up faster, maybe by the middle of next year rather than 2023 as the Fed has been suggesting.”

For the entire interview, watch the video

(Edited by : Dipikka Ghosh)