Shankar Sharma | bull market: Not seeing the end of the bull market in the next 12 months: Shankar Sharma

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Parabolic returns belong to the really unloved areas of the market; real estate is one of those areas. DLF and the others have done a phenomenal job. Building materials are another big topic. If real estate is doing well, one can have a like stock. Liquor and underwear stocks are the other two areas returning from slums to penhouses, according to market veteran Shankar sharma.

ET Now: Around the same time last year, we were discussing whether a new bull market had started. Now everyone is convinced that a new bull market has started. Last year has been nothing less than a year of dreams both in terms of wealth creation and also in terms of how we are now finally on the safe side of the corona war. What are your thoughts for the past year and how much of the good work we’ve seen this year is likely to carry over to next year?

I had tweeted that I didn’t see too much trouble. You can always bicker over valuations and the markets have gone up and that’s an ongoing concern. As market analysts and investment specialists, we always have to be concerned about something or the other, otherwise it seems too easy.

But the point is, when investment bankers start making that much money, it usually correlates very well in India at least with some sort of middle market peak. The number of issues in the market and the amount of capital sought by companies raise the question of whether much of the secondary market liquidity will be absorbed by the primary market and what will create a kind of vacuum in the secondary market. . Usually, secondary markets precede a primary market rally by around 12 months or so. The bull market starts in the secondary, then the primary market boom starts maybe 8, 10, 12, 15 months later. We’ve been at exactly this point since April of last year and about 14-15 months in this bull market and the multitude of offers is staggering to say the least.

So if I had to look at even a distant issue, it would be the huge rush of QIPs as well as primary market issues. Other than that, we’re still on a very good wicket based on two-three factors. I think we are due for some degree of correction or at least not a correction in terms of price, at least in terms of time. We have grown phenomenally in a very short period of time. The markets are catching their breath and rightly so. But don’t think it’s the end of a bull market or anything like that. That day will come, but certainly not in the next 12 months at least. It can be, at best or at worst, a slightly declining market in which still a lot of money will be made on the basis of individual stocks.

Let’s analyze where there is a risk versus where there is an opportunity in the market. If I were to ask you to give me three buckets and categorize the sectors or stocks within that market cap agnostic, where do you think there is no turning back? Where do you think there is going to be a volatile return and where do you think there is going to be a parabolic return from here?
The no return is pretty straightforward and it’s the guys we’ve carefully avoided over the past 15-18 months who are the Levers and the Nestles and the ITCs and Asian Paints of the world who are no doubt big companies but they’re not great stocks, at least they haven’t been great stocks for 18 or 24 months.

They had a good time in 2018-19, when the rest of the vast market was not doing very well. These are the stocks that have done pretty well compared to the rest of the market and have created a story in the market that you can buy these companies anytime and you can earn 20% per annum or whatever. This is total nonsense. You have to go back in history and see that there were long stretches of time that they didn’t deliver any feedback. I think we are right in the middle of this period where these actions will not make a lot of money.

In fact, that’s what I told another reporter that a Lever or Asian Paints is not the kind of stock that will get you a penthouse in South Bombay. If you live in this penthouse it will prevent you from going down to street level. The first question is therefore simple. Parabolic returns belong to the really unloved areas of the market; real estate was one of those areas that we bought a lot between March and April. In our diagrams, the DLFs and the like have done a phenomenal job.

Building materials was another big topic that we thought would be back in line with real estate that has been bombed for a very long time. Some of the money earned in the stock market is seeping into the real economy of durable assets, which is real estate. If real estate is doing well, you can have a stock like Kajaria Ceramics. They also did very well for us.

When people earn money, they start to drink a lot. So we bought the alcohol stock which worked very well for us as well. So, yeah, we’ve been unconventional for the last four or five months buying multiplexes, real estate, and a few liquor stocks. We also bought some stocks of underwear. When people stay at home they don’t buy a lot of underwear, but when they start going out it can be assumed that they will be wearing more underwear than in the past 12 months. So let’s just say we’ve been a bit unconventional in our strategy and it has worked really well for us. Rupa and Dollar have been decent actions for us. These are the parabolic return areas of the market.

Other than that, the most stable returns obviously come from the pharmaceutical pack. They’ve corrected a bit in the last few months, but they’ve done really well the past 12 months. But again from this point they won’t take you from the ground floor to the penthouse just yet.


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