Even as the market greeted the UPA result with an upper circuit opening on Monday — something which has happened for the first time in history — Shankar Sharma, Vice Chairman and Joint MD, First Global said the win was an amazing verdict.

“This win is the ultimate game changer for the country, comparable to what happened in ‘84-‘85 and in ’91,” he said. Sharma said a 40% rally may happen in the next two to three months. “We have got a huge shot in the arm. I think let us just enjoy the moment,” he said. “Then we will regroup and we will reassess what is to be done but this does give us a chance to climb our way somewhat out of the bear market. We will see whether it takes us completely away into the bull market territory. That is still some distance away.”

Here is a verbatim transcript of Shankar Sharma’s exclusive interview on CNBC-TV18. Also watch the accompanying video.

Q: How big an event is this for the stock market in your eyes?

A: I think this is an absolutely amazing set of results and it lays a foundation for a different India five, 10, 20 years from now. That is the central thing that I am focused on. It is a vote for peace, for stability, against hate-based politics, against divisive politics; it is a vote for the poor, for the rich, for the urban-dweller, for the rural-dweller, for Hindus, for Muslims. It is just an amazing verdict. My prediction before the election results were declared that the Congress would get 165-170 seats and the United Progressive Alliance (UPA) would get through reasonably but more importantly, my prediction was that in two elections Bharatiya Janata Party (BJP) will come down to 40-60 seats. That is my long-term prediction on the politics of this country. So the long-term projections on the Sensex etc are secondary to me at the present moment.

It is my belief that this is a huge pendulum swing in the favour of the Congress that you are seeing. They have absolutely the right set of leaders to take the country forward. Rahul Gandhi’s whole initiative to bring in youth into politics I see is as relevant as significant as Rajiv Gandhi’s policy of liberalizing the IT industry, opening up telecom, the small car Maruti that was fructified under his watch. All those things were game changers for India twenty years later. India became a force to reckon with in the world because of IT, in telecom — Bharti goes to 10 crore subscribers — all the result of those policies in 1984-1985. I think what you are going to see now is 20 years later, our children will look back and say that this was the ultimate game changer on par with what happened in the 1984-1985 or what happened in 1991-1992 when Manmohan Singh became the Finance Minister of India.

Q: Is it a vote for an economy that will rebound faster than any of us expected on Friday?

A: It is like getting the news that you have been selected to play for India in a Test match. What do you do then? If I were that player, I would go out and celebrate that particular moment rather than start to worry about how am I going to handle Brett Lee or how am I going to handle Steve Harmison because that takes the edge of the whole event, those will be tough battles to fight. Nobody is going to give you an easy time when you are out there playing test cricket. But if you start worrying too much about that, you lose the fun of the moment. I think we should simply enjoy the fun of the moment that is the important thing. Live today, live the weekend rather than start worrying about the fiscal deficit and the global slowdown and our export growth and the index of industrial production (IIP) numbers, those problems have not gone away.

I think we have better tools now to handle those problems than we had on last Friday. Without the Left, I think the Congress is a very strongly pro-reform party and which is why I always say that I don’t know from where people get the notion that the National Democratic Alliance (NDA) was the reformer and Congress was sort of anti-reform. The NDA built a few more roads — let us grant them that — but other than that the big path breaking reforms in India starting from Pandit Nehru’s time of building a huge public sector, which was a drain for a number of years but today a large part of the wealth in the market has been created because of the listing of the PSUs over the last 15 years. So Congress is a very pro-reform party, it has great leadership right at the top, clean leadership, good government and now with Rahul Gandhi you will have a huge incorruptible second tier of future leaders. I think you will see very good reforms — given the constraints of the fiscal situation and the other situations, it may not be absolutely big bang but let us just hope for the best.

Q: You have explained how politically significant this could be but could it be a game changer for the market as well? Do you think such a political result can lead to India coming out of the bear market?

A: It could. I wouldn’t be surprised if it actually did play out that way. I remember the verdict that Rajiv Gandhi got in 1985 and I remember how bullish the markets were in 1985 and 1986. They were just amazing markets. So the euphoria of getting a good mandate-led government can do very strange things to the markets. So a bull market will be born once we take out the old highs. That I don’t think is going to happen in a next three months time. It could happen maybe in the next two years time because there will be a lot of challenges along the way. We are not yet out of the woods on the pure fundamentals but we have got a huge chance of getting out of the woods. We have got a huge shot in the arm. I think let us just enjoy the moment, let us enjoy a huge pop up of 20-30-40% perhaps in the next two-three months time. Then we will regroup and we will reassess what is to be done but this does give us a chance to climb our way somewhat out of the bear market. We will see whether it takes us completely away into the bull market territory. That is still some distance away.

Q: Trading halted at 13,500 this morning, you are saying 40% above that?

A: Why not. Momentum and euphoria are great things. They can do strange things to valuations. I don’t think India is cheap if you look at stocks like Reliance or HDFC or even Larsen & Toubro (L&T) and Bharat Heavy Electricals Ltd (BHEL) — they are not cheap stocks by any stretch of imagination, they were not cheap on Friday and you add another 20% on top of that and maybe another 20% even on top of that, you are talking multiples which are now into the mid-20s even high 20s or some. That is not going to give a lot of comfort to people who look at stuff like valuation but on the other hand if you keep looking at pure momentum, this could still be a reasonably strong market not withstanding global cues which were still pretty negative — when I last checked them this morning.

Q: Would you be prudent to buy in now hoping that even if there is a pullback, the whole range for the market has shifted up now from the earlier kind of range pre-election result?

A: I am not a big believer in buying in when it is up 30%, by nature I tend to be more cautious on these things. But for long-only funds, they have very little options. They have to go in for more hedge fund-chasing performance, they have very little options but to go in. But a guy on the street probably has some mutual funds, he has a few stocks, he should simply remain there till such time that we begin to see enough signs on the other side of the global economy worsening more rapidly or that numbers come out much worse. So let us say that the market rush to 40% and then you get a bad set of numbers whether from India or globally and the market sell off 5% from there, you know that at least this part of the move is then over. So you have some time to take money off the table probably not just yet, you can probably ride it a little while.

Q: Do you think India can outperform because of what has happened over the weekend and money flows might actually come in more to this part of the world because of the conviction that, medium term, the shape is changing?

A: Yes definitely. I think that would be a reasonable call to make that India’s problems have been largely political. The macro part also suffers because of the politics. In pure coalition politics, it becomes very difficult for the Prime Minister to impose certain performance parameters and guidelines on the individual ministers who are not part of the large party. So it is not like a class monitor who can dictate terms and conditions to various parts of the class. The PM in a coalition is nothing but — he is just like a broad father figure — because if from a coalition partner, the minister is not doing a good job, there is very little that the PM can do. Now fortunately you can hold ministers to strict accountability and by whatever I have read in the papers and seen on television that Congress is pushing even the coalition partners — whose bargaining power is a lot lower — to bring and nominate younger leaders rather than the old fossils. So even because of the Congress, the fossils will get less of a chance, the younger generation will get more of a chance and also they can push even the coalition partners to give them better ministers rather than the old men the last time.

In Bihar and in Uttar Pradesh (UP), the stats were that none of the contestants with criminal backgrounds got elected. This is not just about the stock market, the electorate this time has given just a very intelligent verdict. That is an amazing statistic that the voter gave everybody a chance. Now he has decided that I want to go in favour of an all-inclusive party. That is even more significant than 20% pop in the market.

Q: Last we spoke, you made the point that you weren’t completely confident about the fact that the market may have put the worst behind it i.e. that it will not return to the bottoms that it saw earlier. Barring an October-like situation, do you see that the market may have put the worst behind it?

A: The further you get away from the lows, the less the probability. That is common sense. India may well have done that given that the government’s first 100 days usually are especially not hobbled with the Left, they will do a lot of at least the headline announcements will be quite positive. So in that context the markets have more bias to trade upwards rather than downwards. But I don’t want to think that far out just yet whether all bottoms are in place or that even a near retest of the bottom is completely off the table. I think the probabilities have diminished over the weekend dramatically without any doubt. Anybody analyzing the market has to recognize that this has been a game changer. But I think the world economy is still struggling, India is still struggling on the macro numbers, we have seen IIP numbers, we have seen export numbers. I don’t think the challenges have gone away and given the state of the fiscal deficit, those are problems still. I think to say 7,700 gets reached that easily probably not but I would still say that it is still 10-20% in probability that we might in the event of very bad numbers here or globally we might get somewhere closer to that. Now even 9,000 seems to be a distant number.

Q: You have been highlighting how some of the worst sectors in the market have been doing the best. Do you think this event is positive for many of the worse sectors who might get access to liquidity among other things now?

A: Yes, infrastructure and real estate have pretty much similar business characteristics. They build things and they sell them. So, yes, obviously this is very reflexive that the stock markets – as George Soros says that fundamentals influence stock markets but stock markets also influence fundamentals. So the higher the stock price, the more the chances that the company remains in business, doesn’t go bust, gets access to capital and we have seen that happened over the last one month’s time. So yes, good stock market helps companies and you could see a lot of struggling companies get more capital and that will be good for companies executing projects for those companies. So if you were a struggling real estate developer and you have given contracts to L&T to build your apartment and you get money, then L&T gets benefited out of that or an IVRCL gets benefited or an HCC gets benefited. That segment at least for a while will have some kind of honeymoon period.

source: Moneycontrol

Tags: bse, market oultook, market technicals, market tips Shankar Sharma, market trend, nifty, NSE BES Market outlook, nse india tips, prediction, Shankar Sharma, share market

Similar Posts:

• Sebi bars Shankar Sharma from mkts for 1yr
• Fraud to take Satyam stock to Rs 10: Shankar Sharma
• Shankar Sharma says nothing to do with mkt fall in 2001
• See further upside in midcap stocks: G Shah
• Rally doesn’t indicate return of bulls: Shankar Sharma