No dearth of fools who think I am a ‘perma bear’
Shankar Sharma shocked his vast army of followers by suddenly surfacing and declaring that “Big Bold Huge New Move Begins on the Sensex today! Rejoice!”
Big Bold Huge New Move Begins on the Sensex today! Rejoice!
— Shankar Sharma (@1shankarsharma) May 4, 2017
Some thought Shankar was being sarcastic:
@1shankarsharma Sir, is this a genuine or sarcastic tweet? Even a hint would be helpful.Thanks.
— Sunil Tinani (@2SEOxy) May 4, 2017
Others though it was a counter-intuitive sign that the markets had topped:
@1shankarsharma Selling monkeys to village. Guys it's time to sell. when Big Bear is Bullish.
— Harsh Dixit (@HarshDixit84) May 4, 2017
However, Shankar made it clear that he is dead serious that the markets are in take-off mode.
He has earlier predicted that there will now be a massive incremental run in small-cap and mid-cap stocks.
Indian small cap indexes just cleared 2007-8 highs. Been quite a wait…but now set for a massive run, incrementally too. Single Best asset
— Shankar Sharma (@1shankarsharma) March 31, 2017
Shankar came down heavily on his followers for doubting him.
“gadhon ki kami nahi is duniya mien,” (there is no dearth of fools in this World) Shankar fumed.
@2shameel Ab bhai, gadhon ki kami nahi is duniya mien. Thank God for that
— Shankar Sharma (@1shankarsharma) March 31, 2017
‘Massive Bull’ on small-cap stocks
To address the doubts of his many fans and followers about whether he is bullish or bearish, Shankar has written a detailed piece in Mint where he has declared that “I remain a massive bull on Indian small caps, and have been so for the past three years”.
“Indian small caps are the best equity class in the world. I have maintained this for years now and am even more bullish now,” he added.
However, Shankar made it clear that his bullishness does not extend to large-cap stocks.
“I don’t see a marked recovery in large-cap earnings,” he said in a grim tone.
Bull market has just started, meaningless to look at valuations
“The bull market in small caps has just actually started as it only recently took out its 2007-08 highs. Hence, technically speaking, the new bull market for small caps has started only now,” Shankar said with an air of immense confidence.
He explained that it is “meaningless” to look at valuations on a P/E basis because a “massive move” is coming.
“Valuations, etc are all meaningless terms. Indian bond yields are at multi-year lows, so why look at P/Es (price-to-earnings) without adjusting for far lower bond yields?” he asked.
He explained that if one adjusts for yields that are 20% lower than what has have seen in years, the valuation metrics should be at least 20% higher.
“Hence, I don’t at agree that India is expensive at least in small caps, given better balance sheets, lower cost of capital and reasonable growth outlook,” Shankar said in a firm tone.
There are no major risks at present
Shankar rubbished fears of geopolitical risks threatening the markets.
“There are risks but I don’t think they are fatal,” he said in a dismissive tone.
He added that “As of right now, I see no major risk”.
Shankar Sharma’s stock tips and recommendations
Unfortunately, the interviewer did not ask Shankar Sharma for stock tips or recommendations. Instead, an abstract question was asked as to which sectors he is bullish on.
Shankar replied that he is “very bullish” on metals, steel, chemicals, infrastructure, etc.
In the past, Shankar has recommended an investment in Kiri Industries on the basis that it is “a niche chemicals player which is growing its business, paring down debt and owns a significant stake in Dystar, one of world’s largest Dyes Companies”.
The recommendation has worked out well with a 45% YoY return.
There are several other specialty chemical stocks that we can consider.
NOCIL has won the confidence of Dolly Khanna and Ashish Kacholia which implies that it is a powerhouse multibagger in the making.
Some other specialty chemical stocks that require consideration include Dai-Ichi Karkaria, Sudarshan Chemicals, Thirumalai Chemicals, Apcotex, Oriental Carbon etc. These stocks are the favourites of illustrious gurus like Dolly Khanna, Anil Kumar Goel, Vijay Kedia etc.
In the infrastructure space, Shankar has earlier recommended A2Z Infra Engineering. That has also worked out well with a 93% YoY return.
Shankar’s favourite stocks in the steel space are not known. However, if one is inclined to dabble with steel stocks, Tata Metaliks, the blue-chip small-cap stock which has won Dolly Khanna’s trust, is a good choice.
Tata Metaliks is up an eye-popping 445% on a YoY basis but appears to have a long way to go if you go by expert opinion.
Another worthwhile candidate is Tata Sponge Iron. Daljeet Kohli has given excellent reasoning for recommending this blue-chip stock. The stock is up 54% on a YoY basis.
Shankar Sharma’s bullishness is like music to our ears. We need to shed our inhibitions and take advantage of the situation to load up on top-quality small and mid-cap stocks!