Shankar Sharma gives hope :-)

We have been quite optimistic in the last three months, ever since the sub prime problem happened and that was at around 14,000. Our take was that it was probably going to see numbers north of 20,000 and it just kind of kissed that number a while back.

But we changed our stance about 7-8 days back. Now our stance is that we think markets are headed substantially lower globally. I mean for us, India is just another market in a larger global equity bull market and for whatever it is worth, I don’t think India will just simply sit aside if global equities sell-off sharply. We will participate, we’ll participate to a lesser extent on the way down and more on the way up, but we will not remain immune to that. So lets not forget, there has been a 4-5 year global equity bull market, we are squarely in the middle of it.


The global context that right now we are extremely negative on, we think you’re going to look at pretty much across the world sort of economic numbers, the macro number and the micro numbers look very weak. In that environment, we think equity prices are headed lower, we think India will also head lower. However, having said that, we think India will suffer a lot less largely because subterranean India, in terms of the stock market, is looking in very good shape.



Unfortunately, the large end of the market, the largecap end of the market is looking terrible. I have never ever seen a market that has been sort of run along on the basis of 4-5 stocks in the fashion that it has. If you look at pure fundamentals, I don’t see where the earnings numbers are going to come from. You look at the auto pack, pharmaceuticals, IT, cement, you look at some parts of the midcap sectors like even the banks have had NIM pressures, I don’t see how you are getting a situation wherein 9% GDP growth is not delivering any kind of sustainable earnings numbers, at least visible for the next couple of quarters, for any of the core industry that we are talking about. Even the construction company numbers have been disappointing by and large save for the odd Larsen and Toubro.



I am saying that there is a big divergence between the economic growth numbers and on the ground reality of businesses, I think it’s the time that something’s got to give. I think the markets will correct, they will reach levels of sanity and I think the markets will give you another terrific chance to buy in probably 15-20% lower than that.

Now you can say that’s short-term view and so what’s the long-term view. Frankly I have no idea what the long-term view is. I think India is largely a secular bull market. But having said that, I have seen consensus go wrong too many times to just stick out my neck and say five years from now will be substantially higher, the world can change a lot of things can change.


Immediately I do see significant downside and limited upside. A year out, I would still do hazard a guess that we’ll be higher than where we are. But what is causing me concern are those basic big divergences in economic numbers, macro numbers and the micro numbers of companies and their growth numbers. That’s really causing us a lot of discomfort.