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March 28, 2024

Navigating an Ageing Bull Market: Insights from Shankar Sharma

In a recent discourse at the Business Standard Manthan in New Delhi, Shankar Sharma, the founder of GQuant Investech, highlighted potential shifts in the Indian equity markets as the bull market matures. With the bull run entering its fifth year, Sharma cautioned that the market’s momentum could wane, urging investors to tread cautiously in the coming months.

Sharma pointed out that the current bull market, which commenced its ascent from the lows of March 23, 2020, fueled by the Covid-19 recovery, might encounter challenges typical of ageing bull markets. Drawing parallels to animal analogies, he likened a young bull market to a vigorous horse capable of sustained endurance, whereas an ageing bull market resembles a bull prone to short sprints with intermittent breaks.

Recent regulatory interventions, particularly by the Securities Exchange Board of India (Sebi), addressing overvaluation concerns in midcap and smallcap stocks, have sparked market volatility. Despite acknowledging the regulatory measures as necessary, Sharma believes that such interventions could exert downward pressure on these market segments.

Discussing the interplay between market dynamics and political events, Sharma expressed skepticism regarding the impact of the upcoming Lok Sabha elections on market sentiment. While the markets have seemingly priced in a favorable outcome for the ruling Bharatiya Janata Party (BJP), Sharma cautioned against excessive optimism, citing past instances where market reactions defied political expectations.

Emphasizing India’s intrinsic growth potential, Sharma remains optimistic about the long-term trajectory of the market, irrespective of electoral outcomes. He views market downturns triggered by adverse political developments as opportunities for strategic investments, underscoring India’s resilient economic narrative.

Sharma’s investment outlook favors smallcap stocks, citing their agility and growth prospects within regional markets. Contrarily, he foresees limited growth potential in large-cap stocks, attributing this to constraints imposed by nominal GDP growth. Sharma advocates for a diversified investment approach, allocating a portion of investments to equities, fixed deposits, gold, and real estate, while emphasizing risk-adjusted returns over conventional investment paradigms.

Challenging conventional investment wisdom, Sharma advocates for a nuanced approach that balances risk and return across diverse asset classes. He warns against overreliance on traditional investment strategies, advocating for a more dynamic and adaptive approach to navigate the complexities of the evolving market landscape.

As investors navigate the evolving dynamics of the Indian equity markets, insights from seasoned experts like Shankar Sharma provide invaluable guidance in devising resilient investment strategies tailored to weather the uncertainties of an ageing bull market.

Jhumpa Lahiri

Jhumpa Lahiri

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