Shankar Sharma, vice-chairman and joint managing director, First Global, tells Business Standard that while markets may correct by 15-20 per cent after the Budget, they will rebound and reach previous highs in the next 18 months. Excerpts:
The Nifty has been going through a period of consolidation. Where do you see it in the near term?
Broadly, the market is looking good till at least the Budget. If there are some retrograde moves in the Budget, it can spoil the mood and there could be a correction of even 15-20 per cent.
Small- and mid-cap stocks have been rising recently. In the past, retail investors in these stocks have burnt their fingers. Do you think small investors have become smarter this time?
Once the market enters into a correction mode, small-and mid-cap stocks will fall just as fast as they have risen. And, the fall could also be on low volumes. Investors who do not book profit may get stuck.
How will the market perform in 2010?
The market will bounce back after the post-Budget correction. The reason is India's strong fundamentals.
Last year's crisis was a stress test in which India emerged much stronger. In 2010, the equity market will continue to give positive returns. In the next 18 months, the market may reach previous highs.
Given that equity penetration among retail investors is low, do you think there should be more efforts to expand the equity cult?
Retail investors should remain careful about equities. One of the important reasons why India was less affected in the crash was because of high holdings by promoters and foreign institutional investors.
Retail investors own hardly 10 per cent of listed companies. Hence, erosion in their wealth was also lower.
But it is said that equities give better returns in the long term.
But, small investors, in general, don't make money from equities. A very few make big money and their success stories are spread to lure others. A large majority don't have the expertise to do research and lose.
There are very few who can do research and take the huge risk to make money in stock markets.
If equity is not attractive for small investors, where should they invest?
Retail investors should put only 10 per cent of their money in equities and once this money becomes 30-40 per cent, they should book profits and bring down the equity portion.
Real estate and gold are better alternatives. Within equities, auto and pharma sectors look good to me. Information technology is attractive, provided the rupee doesn't strengthen further.
