Dalal Street equity investors lost more than Rs 25 lakh crore in May as the market capitalization of BSE-listed companies fell to Rs 240 lakh crore on May 12 (around 3pm) from Rs 266, 97 lakh crore on April 30 last month. A few factors, including weak global signals, growing inflation concerns and strong selling by Foreign Institutional Investors (FIIs), weighed on market sentiment. Meanwhile, business today sat down with market veteran Shankar Sharma, Vice Chairman and Co-Chief Executive Officer of First Global to understand what investors should be doing amid the current equity market turmoil. Edited excerpts:
Business Today (BT): Mid and small cap indices have so far fallen more than 18% from their respective all-time highs. Are we heading for a bearish phase?
Shankar Sharma: Bull and bear markets are an integral part of investing. Right now, we are in some measure of a bear phase. Several investors who entered the market after the Covid crash are still unable to understand what is happening in the stock market. This is a tricky exam where some of the easier questions come first and then somewhere in the middle you start getting more and more tricky questions. And towards the end, the trickier questions are there and that’s really where we are right now.
BT: There are non-curriculum questions in this exam. Look at the kind of geopolitical tensions we encountered, we weren’t prepared for it, and now the kind of inflation. So how do you see unprepared things coming to market?
Sharma: Welcome to the market, there is no program here. Inflation, oil prices and war are all a threat to the market. These things keep happening here for a long time. It didn’t happen for the first time. So the point is that all things are temporary. The smartest will survive without panicking. Good stocks will come out of it and the next upswing will give you back most of what you lost.
BT: What should investors do in this configuration? Is it time to stay away or is there an opportunity to buy the dip?
Sharma: There is always an opportunity. The point is, you have to know the art of stock picking in this market. In a bull market, investors have wider choices. In a bear market, the choice narrows.
BT: Where do you see the buying opportunity? Are they large caps or commodities?
Sharma: There are no hiding places in a market crash. We all lose money. My P&L is not making me feel very good right now. It is not possible to survive a bear market with truly positive returns unless you are smart enough to buy put options. In one line, I would say buy stocks that are holding up well. In a falling market, most people tend to sell their good stocks and buy stocks that have fallen a lot, which is usually not a wise strategy. So you should buy strength in a bear market. Usually these stocks will rebound much faster.
BT: Given that you are also a global investor, what other markets look firm at this point?
Sharma: India is probably the best right now. The country appears to be the safest market not because you won’t lose money, but because you will lose the least money there.
BT: Between large, mid and small caps, where would you place your bets right now?
Sharma: Mid and small caps are where you will make outsized returns, as many companies are doing very well. However, just because companies are doing well doesn’t mean the stock price can’t go down. It is a long-lasting phenomenon.
BT: As you said, India is the best market to invest in right now. So why are FIIs selling wildly?
Sharma: To a large extent, this is not an India-specific point of view. This is a vision of emerging markets. India is one of the markets of this India, only 2.2.5% of world markets. In terms of market cap, it’s a very small market. When large allocations move from emerging markets to developing countries or from equities to debt, there are outflows of capital from China, Taiwan, Korea, Brazil, Russia and also from China. ‘India. These large portfolio flows do not mean that people dislike India. They don’t like emerging markets. And that is the reason for these outings.
BT: How do you see the trend until March 2023?
Sharma: It is very difficult to make views over a year. Instead, I can tell you that you should buy strong companies and stick with them as long as the numbers come in, even in a tough environment. No one can predict the stock index. I don’t even want to go there.
BT: Have you invested in the largest IPO LIC in the country?
Sharma: No, I don’t invest in IPOs. I have never found anyone to make money investing in IPOs. So it’s not my investment style.
BT: What is your advice to sector investors?
Sharma: The metal space still looks okay given the supply-side constraints. The IT sector will always be fine. If the US slows down, the Rupee could provide some cushion as the currency looks weak.
BT: Finally, how do you view your personal portfolio amid the ongoing correction? Are you fully invested right now?
Sharma: I started to switch a bit from fixed income to equities. However, I still believe there is pain ahead for equities.
Read also: The free fall continues: Sensex crashes at more than 1000 points! What should investors do now?
Also Read: Bloodbath on D-Street: Factors Behind Sensex Crash Today