The Big Bear Of Dalal Street, Talks About The Promising Bull Market In India While Warning Investors About The Upcoming Political Risks

Roshni Shekhar | August 30, 2023

In an exclusive interview to The Bottomline, veteran investor Shankar Sharma, founder of GQuant Investech, shares his thoughts on the sustainability of the bull market, and his investment strategy to make the most of it.  Edited excerpts: 

Q: What are your thoughts on the current bull market in India?

A: The bull market in India is very much there to stay. At the same time, please remember that there is a bull market everywhere, (including) in Europe, Latin America and Japan. So, it’s not only India. 

Q: Is this bull market sustainable for long? 

A: We definitely think it is sustainable in India for at least three or four years because India is still growing very well. There are always going to be ups and downs but on a long basis, markets are definitely going up. 

Q: Did Fitch’s downgrade of the US sovereign rating from to AA+ from AAA rating affect stock market sentiment? 

A: I don’t think it’s a big event or (a) major catastrophe. Markets have already shut it off (and). moved on from there. 

Q: Metals, automobiles, and banks declined immediately after the announcement. Was it just a knee-jerk reaction or are we headed for challenging times?

A: It was nothing major. It’s already behind us. There is no lasting problem because of the downgrade. 

Q: How will the downgrade affect the US dollar?

A: I don’t think it has any impact. 

Q: What are your thoughts on prospects for the Indian economy?

A: The Indian economy is doing well. There is an election coming up. There will be uncertainty around that. We need to only watch out for that. Otherwise, the Indian economy looks to be in good shape. 

Q: What are your investment recommendations for the Indian market in the near term? 

A: Investors should focus on quality small-cap companies because the maximum money is going to be made by quality companies, not junk. Analyse them properly, and look at their fundamentals. That is the area where you make the most money. 

Q: What factors do you consider when you invest in small-cap and mid-cap stocks? 

A: I buy 25-30 good companies. When you buy 25-30 companies, 10-20% of them will do phenomenally well. That is the way to do it. Don’t buy only 3-4 companies.

Q: What key economic and political factors should investors take note of ahead of the upcoming elections? 

A: For one, the direction of Indian interest rates is important… The inflation situation is critical for the equity market and by the end of this year, the elections will become a major factor. Investors need to be watchful; they should not get carried away. If there is uncertainty, poor fundamentally driven companies fall the most. 

Q: Will any particular sector be affected because of the elections? 

A: The infrastructure sector is very dependent on government policy. That will get affected for sure. 

Q: How would you assess the government’s economic policies? 

A: Government spending has been the driver of the economy in India. We need to (see) if government spending can continue at this level because the fiscal deficit is extremely high in India. 

Q: What are the key risks to this bull market?

A: Political risk. 

Q: What are your investment strategies to make the most of the bull market? 

A: I would advise watching 25-30 good names in the small-cap area and then observing their performance. If they are not performing, eliminate them quickly. Do not sit with losers. Stay with the winners in the portfolio. 

Q: Are there any economic indicators that you are watching closely right now that could signal a market trend? 

A: Interest rates. That is the most important factor in determining market direction.