Mumbai: Since late 2007, when it appeared that the Bombay Stock Exchange’s benchmark Sensex index was exempt from the laws of gravity, Shankar Sharma has been predicting a coming fall.
India’s most tracked indices, Sensex and Nifty, were back in the red on Thursday with investors rushing to sell stocks across board. Sensex, which rose a little more than 700 points, or 5.4%, on Wednesday, surrendered a large part of its gain and lost 4.18%, or 570 points, to close at 13,094.11 on selling pressure. The broader 50-stock Nifty index lost 4.09% or 167.60 points, to once again pierce the technically important support level of 4,000.
With this, Sensex has lost close to 36 % this year, shaving off Rs29 trillion of investors’ wealth. Foreign institutional investors, or FIIs, the main driver of Indian market, have taken out $6.45 billion from Indian markets, after pouring in $17.36 billion last year.
Analysts and fund mangers are now convinced that the bear market that has set in could well extend to the end of this year and even beyond.
Many home-grown bulls, including ace investors and mutual fund managers who made a killing from their investment decisions in the five years between April 2003 and January 2007 when the benchmark rose seven times from 2,924.03 to 21,206.77, are now absent from the market.
Globally, there are established doomsayers who bet against the army of bulls but in the Indian market nobody wants to be branded a professional bear.
Sharma is the closest India has to a bear.
The joint managing director of the Mumbai-based First Global group, which runs brokerages and an investment bank with subsidiaries in the US and the UK, continues to believe that the Sensex could hit 10,000 levels and says he “would not be surprised if it goes even below”. First Global derives 60% of revenues serving overseas clients.
Edited excerpts from an interview:
You are probably the only bear in the Indian market....
I don’t agree with the term bear. Our job is to get the market right for our clients. That is what people come to us for. Our views on global equities turned negative late last year. We turned negative on global equities around May-June last year, even before the sub-prime crisis (in the US) erupted.
What made you think along those lines?
A doomsayer? Shankar Sharma of First Global group. (Abhijit Bhatlekar / Mint)
We saw conflicting signals in equities market. There was a disconnect between what the global indices were telling versus the market internals across emerging markets. The entire bull rally in emerging markets was led by just two markets—India and China. This was when there were 15-17 different markets of some consequence in the basket. Again, within India the internals were weakening. Only a few companies, the Reliance group and two or three banks, were taking the index up.
It was probably in December last year that you first spoke about the Sensex going down to less than 10,000...