Mumbai: The stock market is pretty tricky to call right now and it’s not certain whether it is heading for a breakdown or going to rise, Shankar Sharma, director and chief global trading strategist of First Global Stockbroking Pvt. Ltd, said in an interview. Edited excerpts:

How are you reading things globally now? There has been some turbulence but no sign of a breakdown yet. How are you calling the October-December quarter?

Tricky market: First Global director and chief global trading strategist Shankar Sharma says a lot of mid-cap stocks will perform well. Abhijit Bhatlekar/Mint

So a lot of interesting disconnects are happening. The dollar has been weakening, commodity prices, interestingly, oil, has not followed suit in the sense that ordinarily the dollar had weakened so much, oil should have been probably $85-90 (Rs3,961-4,194) per barrel but it has been pretty much range-bound in $65-72 per barrel. Gold has had a move but it has been a huge laggard in this March-October rally, so it has some catching up to do.

Then you would argue that a strong euro is bad news for Europe, but European markets have been on an absolute tear. So it has become a very hard market to read, and for every down market on a day, you will see another up market that compensates for it. So all of us are still searching, and probably the clues will emerge a little while down the road but clearly, right now, there is no clue as to whether you are headed for a huge breakdown or the market has breakout on the upside. It is a pretty tricky market right now to call.

How are the odds stacked?

If you take India, you have seen melt-ups and meltdowns happening simultaneously in the last month or so. The meltdowns have been clearly in the telecom space. I would reckon Reliance Industries falls in the same pack because it has underperformed the markets dramatically. Despite the bonus, there was no reaction on the stock price; ordinarily, it should have been up 4-5% but it was pretty much flat.

On the other hand, there have been stocks that have been melting, a lot of the mid-cap names have been flying all over the place or stocks like IDBI up very sharply from Rs110 to Rs130 in a matter of four weeks. So it has become a completely two-tiered market. By and large, my personal view has been that Reliance Industries, Bharti, NTPC, ONGC, Reliance Communications, those would be places where you will lose performance points on a relative basis or in absolute terms. The other spaces, for instance, the auto space—Bajaj Auto has been absolutely stunning performer—are the spaces where you will make money.

I think this is a market which is in some senses similar to what we saw in 1998-2000 in which the indices did not do too much but stocks outside the mainline indices did phenomenally well. At that time, it was IT (information technology), around this time there may be second-tier banks or smaller IT companies or a lot of other mid-cap names.

How have you read the primary market over the last month or so because most of the IPOs (initial public offerings) with the one exception of Oil India have at best clung close to issue prices?

I think that’s good pricing by investment bankers because I don’t think in the IPO market you can be over-fair to the investor. So I think this is just good pricing... I don’t believe IPOs can ever make you money on an aggregate basis. One or two might, but by and large that end of the market is almost always going to disappoint if you are on list for a 50% rise or something of that sort.