Mumbai: Vice-chairman and joint managing director of First Global Stock Broking Ltd, Shankar Sharma, spoke in an interview about his views on the stock markets, whether they have hit bottom and the outlook in the near future. Edited excerpts:
From the evidence of the last three months, are you ready to say that the bear market is over?
I think so. Again, as in markets, when the bear market started, even though one might have made a call that we were entering a bear market, you are still never sure till the price action actually supports your basis thesis. And for the price action to support that, you need it to be substantial enough for you to really start believing in your own thesis.
When the markets topped out at 21,000, till 16,000 there was still a chance that it was nothing but just a small pullback and would again go back and take out highs. But you know when it reached that level then one was pretty convinced this was the beginning of a pretty significant move and you know markets would head lower.
It is pretty much the same on the other side that till the markets reached, let’s say, you know prior to elections and my view has been this, that prior to elections there still existed a very significant risk that India would have decoupled negatively from the rest of the world had the election outcome been bad. The fact that it turned out to be good was a real positive.
But had it been bad we could have seen probably to limit down days just as easily as we saw the one limit up day. So you need price confirmation to support your basis thesis. Looking at the way the markets bounced have back post the budget correction—and globally, not just in India; that is really the big confirmation that one was looking for.
Had the pullback been very anaemic, very weak, and had the markets really struggled on the way back from the sell-off, then one would have been tempted to believe that look, it’s still just a bear market rally. But looking at the evidence on the ground that the numbers have been pretty okay.
The pullback has been very robust and today the markets really took out the range that they have been in since 18 May, which was 14,600 to 15,300-15,400 levels on the Sensex.
So, I think there is enough evidence now on the table to suggest that India at least within the emerging markets is looking at a new high in the next few months’ time.
Again, all these predictions are fraught with a lot of danger, are fraught with a lot of risk, but I would say the balance has shifted, the needle has shifted in favour of that happening rather than what I earlier thought maybe two or three years. It could probably happen in about a year’s time.
Where do you think we have a durable bottom in place now?
I think the current move probably takes us closer to 17,000 than to 13,000. I think 17,000 gets there before we get to 13,000. So, therefore, if you were to get to 17,000, then a 20% pullback doesn’t take you back to 13,000.