Shankar Sharma, chief global trading strategist, First Global, spoke to Ujjval Jauhari on the markets.
How do you see the markets panning out from here on, given the recent sell-off? What are the likely triggers for an upside / downside?
The worst seems to be over for now. We will have to see what fresh developments take place globally, but I don’t see an immediate downside from here on. The markets have corrected substantially and we can argue to a reasonable extent that the negatives are factored in at current levels.
The immediate-term triggers for an upside can be a good set of GDP numbers, the Reserve Bank of India (RBI) changing its hawkish stance and a solution to the political imbroglio.
What is your opinion on the first quarter results of India Inc?
The June 2011 quarter results were tepid; there were not many positives. The results were not good enough to propel the markets higher and I don’t see any improvement for the second quarter too. I expect earnings downgrades for the rest of the year.
How are the foreign institutional investors (FII) viewing developments across the world and especially in India?
The FIIs surely have no options but to come to emerging markets (EM), given the problems in the US, Europe and Japan.
But overall, if the global equities are in a weak spot, this factor by itself may not be enough to take the Indian markets higher. However, the FIIs have not turned negative for India post this correction. What may queer the pitch is the local political situation more than anything else.
Given the sharp correction in commodities and commodity-related stocks, do you see any value in them now?
Most industrial commodities move in tandem with the equity markets. So, if equity markets recover, one can expect an improvement in commodities. Looking at global scenario, there might be a technical rally. But on a secular basis, I don’t think this trend can be sustained.
Are there any other sectors where you see some value? Any mid-cap or small-cap picks?
Valuations of small-caps look reasonable. They have tanked 80-90 per cent from their highs. I think the next bull market will happen in small caps. One can start bottom fishing in this space. However, one has to be careful in selecting the stocks.
What is your advice for investors in the present scenario?
Fixed deposit rates are far more predictable and are a good bet. As of now, I don’t think any incremental money is going into equity markets. Medium-to-long term investors can start investing 20 per cent of their funds into equities.
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