When Shankar Sharma sounded the early warning on 13th March 2013 that a great crash in the stock market was coming, investors ignored him. The result was a deep hole in their portfolios because the Nifty slumped from 5851 on 13.03.2013 to a 52 week low of 5285 on 21.08.2013. The Nifty lost only about 10% but individual stocks got slaughtered with 20% to 40% loss.
After that 52 week low on 21.08.2013, the Nifty surged to an all-time high of 6317 on 3.11.2013.
Now this is where we have to pay attention. The surge from a 52 week low of 5285 to an all-time high of 6317 (20%) has taken place in just ~ 60 days or ~ 45 trading sessions.
In his latest interview to ET, Shankar Sharma has analyzed this phenomenon. Firstly, he claims that when the Nifty touched the bottom in September 2013, he turned bullish and advised his clients to buy stocks, especially banking stocks. He also claims that he had foreseen that the Fed would not taper the QE in Sept 2013 and that there would be a vertical rally. However, this is not documented and so can be dismissed as self-serving.
Secondly, Shankar Sharma points out that the surge in the Indices has been very narrow. While a few big-ticket Index heavyweights have gone up, the rest of the market has not participated to the same extent. “The market is fraught with danger. I have rarely seen a market which is so narrow sustain for very long” he says.
“Its time to take money off the table” Shankar said with conviction in his voice.
There is three-fold logic to Shankar Sharma’s analysis. Firstly, the market has surged heavily in a very short space of time. Secondly, the rally is not broad based across stocks and sectors. Thirdly, the economy is still in a sluggish state with the RBI having reduced its prediction of the GDP growth rate to 4.8% from 6% for FY 2014.
In its latest monetary policy report, the RBI said “The median growth forecast for 2013-14 was revised downwards to 4.8 per cent from 5.7 per cent in the previous round, which is lower than the growth of 5 per cent registered during 2012-13.”
So, it is clear that the macro-economic conditions have deteriorated and there is no justification for being a “table-thumping bull“.
Shankar Sharma also came down heavily on the argument that one should not be bearish on equities when liquidity was a high.
“I never buy any of this liquidity nonsense” he thundered. “By that token the markets should never have ever come down because the FED has always had an easy monetary policy to benefit Wall Street and Main Street”. “These are self-serving arguments spun out by people trying to protect their jobs” he said. “There is no co-relation between liquidity and the markets” he added.
Anyway, now the question is what you will do about this analysis. Will you ignore it or take proactive steps?
Speaking for myself, I am convinced that this vertical rally has to give way sooner or later. So, I am going to take advantage of this rally to get rid of all the junkyard stocks in my portfolio (I know I should have done this earlier). I’ll keep the money ready for deployment into my top-20 dream stocks as and when the slump happens.
I think Sharma turned out to be a looser….Share market is risky we all know …I made more than 50% in Banking , this sharma was asking to avoid…..lol…I highly doubt ability of such people…
I have a great regard for Shankar Sharma but I think his prediction has not come true which he made in your column a couple of months back advising everyone against the equity t but that has not happened and in fact has gone up further and I am not sure what does he mean when he says losers to sell equity now which means he accepts that market has climbed significantly from the earlier levels and it is time to book profit. I also differ with his prediction on 2014 that it will be worst than 2013.
Shankar Sharma talks as if he is the only all-genius when it comes to stock markets and everybody else including US Fed Chief,RBI governor, Finance Minister, etc. all are just fools. His predictions about the stock market couple of weeks back have turned out to be totally incorrect; he was the biggest bear and the Sensex/FIIs have surprised quite contrary to his predictions.
I like to read and listen logical talk no matter whether it comes from RJ or Mr. Sharma. Moreover i pay more attention to the arguments of the side (bull/bear) from whose pocket i will get my profits. Regarding the crash that Mr. Sharma was talking about – in my opinion – was the following one which converged with that of mine – with technical approach.
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Regards,
Kamlesh Uttam
The common mistake sharma type people does it to take extreme views . Sell all and sit back ? Why ? It is extreme instance and it shows ignorance from their part .In this respect , I like the views of RJ better . He is always modest and very clear in his views . I was watching Udayan Mukerjee and his view was very laudable .He talked very politely about the present situation . It is wrong to take an extreme views that one day you think sell your gold to buy and one day you are so afraid that u need to sell everything and leave the market .Both are extreme views and one should follow the mid path .
Character wise too this approach is wrong .Share market is risky place and one needs to mange risk part as much as possible .But just leave the market at the moment because you are afraid is not a good character .It is like a timid mentality . There is a term called stop loss to handle many situations. Even if you are a long term investor have a stop loss . Rather than calling investors to quit banking or infra etc one can suggest to play with stop loss.
Stupids were talking about infra as a bad field . One can see JP etc and NCC have given more than 50% …Crude prices are falling which will help India to tackle everything .But these morons will not discuss the effect of lower prices on India economy but will suggest you to buy RIL with logic as if if u do not buy RIL then u r not a good investor . One can see market is shining without RIL also .
No body talks about future uncertainty the way this guy is writing as if all banks are dust now . All PSUs are going to have 15% NPA and India is a big loss making country .
This person should guide if he can rather he is misguiding ….Indian government will do everything to save its bank ….and a commonsense tells us that market will not fall heavily simply because USA is improving and INR is 62 …..I made bounty in export oriented sectors when this guy was calling others looser..in fact sharma is looser at least his views looks funny….
Few months back he was saying in an overconfidence tone that even god cannot save you as he thinks “he is messiah”. then in an latest interview he mention that banks cannot fall 50% from the peak he himself bought bank stocks.
If he had guts he should had come openly mentioning that he is the buyer rather than saying now…
i am agree with Mr. shanker sharma and
Speaking for myself, I am convinced that this vertical rally has to give way sooner or later. So, I am going to take advantage of this rally to get rid of all the junkyard stocks in my portfolio (I know I should have done this earlier). I’ll keep the money ready for deployment into my top-20 dream stocks as and when the slump happens.
lalit shah
(marvellous research)