The mother of all stock bear markets is dead: Shankar Sharma | Market News

We have mastered the art of neutralizing the “bad guys of the bear market” – speculation, inflation, war, disease – and we have dealt with them all. Anyway, we can take care of Pran, Prem Chopra, Gulshan Grover, Do. No, etc. The hero (bull market) always triumphs in the end.

What do you think of China today, in the context of all the recovery measures? Can China spoil India’s fairness party?

It’s possible, and there’s no two ways about it. Over the last 2-3 years, Indian stocks have had no competition in the Asian/Emerging Markets (EM) context. Now we have the Chinese markets. You have to understand that China is not a small market. Amid the stimulus measures, it added almost $3 trillion to its market capitalization, which is a significant share compared to the total size of Indian stock markets. And they added it in one rally! This is a giant market which will encourage investors to turn to China, which was not the case 2 or 3 years ago. The needle is no longer just pointing towards India.

So what will help Indian stocks regain their momentum?

I’m not saying Indian stocks are completely out of the picture. They will remain important and the mojo is not completely lost.

Can the fall in Indian stocks observed in recent sessions due to developments in West Asia continue?

I don’t think the world will allow tensions in West Asia to escalate further. There are too many risks and too much at stake. It’s better to stop the game now. The fall in stock markets is a temporary phase. That said, the problems with Gaza are real and there must be a solution.

For investors, Indian market valuations have until now been dissuasive. Has the fall made Indian markets juicy enough for foreign investors to put money in?

Indian markets have not fallen enough to correct valuations. The drop has just been about 2 to 3 percent. Markets were trading at around 22 times forward earnings, which is by no means cheap. Indian markets will calm down further in the immediate future as China takes center stage. I don’t see the rampant madness in Indian stock markets that we have seen in recent years. That said, we will not see a bear market, but a cyclical slowdown. A bearish phase is excluded.

So, a flash correction then?

Precisely. A bear market is when a stock or index slides 20 percent or more. Nowadays, the fall is brutal and the decline is rapid. Done and dusted in just 4-5 days. In a nutshell, I don’t see a threat to Indian equity markets, but a slowdown.

Individual investors seem to have found a new playground: the primary markets. Are primary markets now a liquidity threat to the (once) thriving small and mid cap segments we had in the secondary market?

Well, there are many crazy companies with non-existent or insignificant fundamentals and crazy valuations that often hit the primary markets. We also saw this earlier. I did it in 1996 and it ended badly. But many investors have since matured in the way they invest.

Talking about 1996, you were one of the first research firms to spot HDFC Bank and recommend a ‘buy’ during its initial public offering (IPO). Are you finding companies currently entering the primary market that have similar potential?

HDFC Bank is a different kettle of fish. It was an equal or almost equal problem. These days, most IPOs come with a hefty premium and/or don’t leave much on the table for investors. Back then we didn’t have free fares like we do today. A good business will bring a significant premium. This limits future gains. An IPO like HDFC Bank is like hoping for another Ramesh Sippy Sholay.

First publication: October 4, 2024 | 2:51 p.m. STI