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Markets paying price for over-investing in political trade: Shankar Sharma

By Samie Modak
May 07, 2015 08:14 IST
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Benchmark Sensex and Nifty after gaining nearly 30% in 2014 are trading in negative this year

The Indian markets, which dropped sharply from record levels, is paying the price for over-investing in a political trade, says market maven Shankar Sharma, vice-chairman & joint managing director, First Global.

"The market had over-invested in the political trade, and is now paying the price for it," he said.

The country's benchmark indices - the Sensex and the Nifty - after gaining nearly 30 per cent in 2014 are trading in the negative this year even as other global peers have held the ground.

The sharp rally last year was largely on hopes of revival in the economy following the Narendra Modi-led government coming to power. But many experts have raised concerns over slow recovery of the economy.

On Wednesday, benchmark indices were trading more than 2 per cent lower following a global risk-off trade.

The Sensex has come off from nearly 30,000 in January to below 27,000. However, Sharma said he doesn't see the market going down too much from the current levels.

"I don't expect the market going too lower from the current level. I am postive on the small and mid space. Large caps are fully baked and don't offer any major upside, save for exporters," he said.

Sharma said the ongoing reaction is a fallout of "too much expectations getting built up into the market  in terms of earnings improvement or political reforms."

"In my view, given the miserable state of the ru‎ral economy (rural consumption drove India's growth story from 2008), I don't see any earnings or GDP growth revival," said Sharma.

Sharma said he would invest in the market with the view that interest rates are likely to ease over the next few years.

"The sole reason to buy India is a bet on bond yields coming down to 4 to 5 per cent over the next couple of years. Rates in India are way too high," he said.

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Samie Modak in Mumbai
Source: source
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