If Modi comes back with weaker numbers, market may not like it: Shankar Sharma

Sharma is of the view that after the recent correction it is tough to say that midcaps have bottomed out.

The big ‘P’ or political situation is the next big uncertainty that Indian market will face in the next few months and investors should not ignore the risks which come with it, Shankar Sharma, VC & Joint MD, First Global said in an interview with CNBC-TV18.

“It is a significant event and one should not be dismissive about its importance. It will have a pretty significant effect on the stock market. It was a done deal the last time when the campaign started, but this time it does not look like a done deal,” he said.

He further added that there is a possibility that the current government could come back with a weaker setup which markets may not like. Well, there is also a possibility that the market may go with the weaker setup.

“Hence, this is a significant event and I have no clue as to what will happen but whatever happens it will have a significant impact on the markets,” added Sharma.

Commenting on the markets, Sharma is of the view that even after the recent correction it is tough to say that midcaps have bottomed out.

The selling pressure is not really reflected in the benchmark index while the carnage is quite visible in the broader market. The S&P BSE Sensex is down by about 0.5 percent so far in 2019 while the midcap and the smallcap indices have plunged 8 percent, and 8.09 percent, respectively, in the same period.

Commenting on specific sectors, Sharma highlighted that NBFCs and autos aren’t looking very robust right now. “I have never been a believer in NBFCs in the past even though the stocks did very well,” he said.

“But, if we look at them currently, they have corrected very sharply. Even housing finance companies which we thought are operating in a secured way was not necessarily the case. So, we don’t know where the bottom is that is the problem with banks and NBFCs and I tend to avoid them,” explains Sharma.

In the auto space, Sharma has liked Maruti Suzuki for a decade but now numbers are not supporting a bullish case for Maruti, despite recent correction.

Talking about Tata Motors, he said the company does not have the necessary capital to compete in the market, even the models are beginning to age. Technology is beginning to age and this is one sector where you have to spend a lot of capex.

“And, with Brexit being a reality and China which was big driver again is a problem situation. Well, there is no quick way out but they good management which will figure something out sooner or later,” added Sharma.

Source- www.moneycontrol.com

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