Shankar Sharma, VC & Jt MD, First Global spoke about his reading of the market and his outlook.
“I have seen bull markets, bear markets for a very long time. Bull markets are relatively very easy to spot, because stocks have a finite point up to which they can fall. Nothing goes to zero, not a market. At a point when time valuations will become very cheap and there is a uptick of fundamentals turning and you know that this is a beginning of a bull market particularly if it has come at the back of a couple of years of lull, sideways movement drifting down movement kind of. It is very easy to pick market. I think it is just a child’s play,” he said.
“The trick is in picking bear markets because stocks have infinite room on the upside. They keep going on and on and on and we have seen that in 2000 when I used to think that Infosys at 60 P/E was expensive because in India we had never seen 60 P/E ever before. So we thought that 60 is too high and then it traded finally at Rs 300. So, stocks can go up virtually infinitely. So, calling a bear market or figuring out that we are in a bear market or top of the market is very difficult,” he added.
“A bear market doesn’t really happen in a small segment of the market. Smallcaps are the small part of the market. Bull or bear markets are built on the back of the largecaps. You can’t say there is a smallcap bull market, smallcap bear market, because smallcaps can have bear markets just like that. They can fall 30-40 percent. You have seen even before this year last year demonetization every time 30 percent cuts, 40 percent cuts in smallcaps happen routinely. You want to call that a bear market or a very rapid correction those are all semantics. I don’t focus when I am talking about a macro call to really focus on smallcap. You really have to talk about the big caps or the largecaps. But I still continue to be very bullish on smallcaps, they have corrected 50 percent its cost can’t go to zero. That does not mean that in a bull market you can’t have these kinds of severe cuts the kind we have seen in smallcaps. The problem that has emerged in the last two months has been the larger macro of India, which will hit largecaps obviously the most.,” said Sharma.
Read the full interview:: “This is something else. This is not normal,” says First Global’s Shankar Sharma on the steep fall in markets