5The Indian markets have been unable to sustain themselves at higher levels. With all eyes on the upcoming EU summit, Shankar Sharma, chief global trading strategist, First Global, tells Ujjval Jauhari that one should not expect a reversal anytime soon. Edited excerpts:
The markets have seen some recovery in the last few days. Do you think it is sustainable or is there more pain ahead?
I think the relief is temporary. The problems continue unabated and we are likely to trend down.
Do you expect the European summit to provide some trigger or relief?
Whatever the trigger, it will be temporary. At the European summit, some measures may be announced to tide over the immediate problem, but I don’t think it will help. The problems will remain and gains will not be sustainable.
What’s your take on Q2 results? Any positives we can take?
The results were disappointing and quite tepid. But, I don’t think that would be the end. I believe the down cycle of earnings has just started. In fact, the results have been poor for a while and were being camouflaged by overseas earnings of companies like Tata steel, Tata Motors, Hindalco, etc. Otherwise, the numbers have been very poor for the last two quarters. Now, the camouflage is also wearing off and we are seeing the real numbers.
Do you see the rupee recovering now?
I don’t think it will depreciate much more from here. It may have found a temporary bottom. But, we will have to keep a tab on the capital flows in 2012. We may hold on to these levels if the flows are good.
Looking at the so-called ‘policy paralysis’ and rupee depreciation, what change do you see in the foreign institutional investors’ outlook towards India?
It is difficult to predict portfolio flows. We really don’t know what 2012 has in store. So, it is a tough call to make.
But, viz-a-viz other developing economies, do you see any change in the foreign institutional investors’ outlook towards India?
All developing economies are in the same boat. Brazil is hurt to the same level as the others. So, to that extent, we are not alone. The entire world is hurt and so we can’t single ourselves out as the worst. But, that does not mean we will get huge inflows next year. Global liquidity for risk will keep declining, which is the whole problem.
When do you see a reversal of fortunes for the Indian markets?
It is very difficult to predict. I don’t think the bear market will get reversed in six months. We are in a prolonged bear phase, which may continue for one-two years.
Do you see some investment opportunities at current levels? Which sectors should be avoided?
There are no major opportunities. However, one can buy stocks such as ITC, Sun Pharma, Bajaj Auto and Tata Motors.
How should investors approach the markets in uncertain environment?
One can invest a majority of investible surplus in fixed deposit schemes, which are offering good returns. Around 20 per cent of this can be invested in equities.
