‘The pitch for India is flat, the ball for India is old, the sun for India is out, and the bowlers are not bowling too well.’
‘I think only we can get ourselves out.’
Every market has its day. The Indian market, too, is having its day, underpinned by having done better than the rest of the world during a problematic 12-month period, Shankar Sharma, founder, GQuant Investech, told the recent Business Standard BFSI Insight Summit 2022.
How will you characterise the current state of markets?
Indian equity markets are playing catch-up with global peers.
Between January 2008 and February 2020, the Sensex gained about 16,000 points (from 21,000 to 37,000) over nearly 13 years.
That is an annualised compound annual growth rate return of 4-5 per cent in rupee terms.
In dollar terms, the returns were slightly negative.
However, Indian markets have delivered fabulous returns since Covid (March 2020), after delivering abysmal returns in dollar terms for nearly 12-13 years.
We romanticise the good part of the markets, ignoring the bad part.
But we are going to get both parts over a while.
Every market has its day. The Indian market, too, is having its day, underpinned by having done better than the rest of the world during a very problematic 12-month period.
Why do you think that happened?
India always does well in a global economic crisis than others. There is a different reason for that.
The 1991 crisis taught us a lot about how to make a national balance sheet, at least foreign exchange, bulletproof.
How do you see Indian markets now?
The building blocks of India’s current situation were laid in 1991. Again, coming out of the crisis taught us a lot.
The leaders in every successive government have been very focused on not shaking the foundations of that knowledge.
Overall, it is hard to find a country that ticks all the boxes the way India has.
No investor is betting on Japan. Taiwan, being a technology-heavy country, will have its global cyclicality based on the semiconductor market.
Closer home, China possibly has vast unknown problems.
Europe appears to have no future, except for being a vast tourist destination – the bloc is not keeping pace with the changing times as far as tech goes.
How will you evaluate the positives and negatives of India and China?
One of the biggest positives for India is that it is the ‘good boy’ of the world.
People may do business with China, but they do not like it for a variety of reasons.
On the contrary, people trust India and Indians a lot more.
We have, generally, been well-behaved and model students in the world economic landscape – and we will get our rewards for being that ‘nice guy’.
This is our chance to finish first.
Will geopolitical tensions dent market sentiment back home?
The Russia-Ukraine crisis seems to be fully priced in by markets.
We know that European demand has been affected.
As regards our borders, I do not think the stock markets get affected if the confrontations do not escalate into major skirmishes.
How do you see Indian markets in the next two to five years?
My view is very clear and unequivocal that India is going to be easily the best or (among) the top two performing markets in the world.
While we have outperformed global peers over the past one to two years, that was not always the case. We had a lost decade before that.
It is important to understand that cycles of such nature are durable either way.
If you go into a bear market, on a relative basis, it will take a while for large economies to come back.
And India is still a fairly large economy by any standard.
When it turns and it goes into upcycle, it is like a supertanker.
You cannot just turn it around and make it bad.
How long will this optimism last?
Relative to the down period, the succeeding period of upturn is, at least, 50 per cent of that period.
In that sense, the good times for Indian markets will easily last five years.
It was a seminal moment for Indian markets in 2020 and that is when our (next) good period started.
We made a break from the previous 10 years, even 12 years of underperformance.
India is on a good wicket now. The pitch for India is flat, the ball for India is old, the sun for India is out, and the bowlers are not bowling too well. I think only we can get ourselves out.
Do you think the time for pause has come in the interest-rate cycle?
I do not believe in inflation. It is merely a rate of change that will eventually come down or get tamed with the passage of time.
The RBI should not have raised interest rates in the first place.
This was the mistake former RBI governor Duvvuri Subbarao made in the UPA (United Progressive Alliance) era.
By raising rates, we do not solve anything. A major part of the (current) inflation basket is not rate-sensitive.
So, you end up hurting growth without inflation getting impacted.
What are your expectations from the Budget in February?
I hope the government does not tinker with either long-term and short-term capital gains tax rates or holding periods of asset classes.
Once the door to tax revision is opened, it never closes.
The equity markets have been buoyant and the government needs good equity markets to do a lot of stuff.
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