Crypto investment should be limited to 1-2%; bullish on chemical stocks, China plus one theme: Shankar Sharma

On sectors that he likes, he explained that he is bullish on chemical stocks. Sharma also mentioned that he has faith in China plus one theme. He believes banks and FMCG companies have run their course and are not going to deliver strong compounding growth. He, however, believes that the commodities cycle may run for a few more months.

He said, “Banks and financials, I have said this for a couple of years, that trade has been over and if you see the data on that, Axis Bank is more or less flat over a five-year period, HDFC Bank is flat over a two-and-a-half year period, Kotak Bank is about almost flat for the same period, RBL Bank has been crushed."

"So, if banks and financials are at 40 percent then you have Reliance, which is another 10-11 percent and then FMCGs, again, my view has been absolutely clear for at least two years that this trade is well past its test before date. So you should put it all together- 60-70 percent of the Sensex or Nifty are really companies which are not going to deliver stock price gains of 20 percent compounding, there is no way they can deliver that; one or two might, but on an aggregate basis, it cannot,” explained Sharma.

On diagnostic companies, he mentioned, “If you remove the effect of COVID-19 then they were decent businesses, but not fabulous businesses by any stretch. And in any case, I think the whole COVID thing was a racket, a cartelisation of all these companies. So I am happy if their margins are shrinking because what they have done is really price gouging at a level that is unimaginable. So, it's all okay, they made hay while all of us were suffering. Now let them suffer a bit.”

Sharma reiterated his positive stance on cryptos. However, he clarified that his bullishness on cryptos is from an asset class perspective. He explained that it is a very volatile asset class and investors shouldn’t put more than 1-2 percent of their investment into cryptos.

“When I say I am positive on cryptos, it is from an asset class perspective. It does not mean that every price I like and every price has to be a buy. It’s a very volatile class, I do not think any sensible investor should be putting more than 1-2 percent of their allocations into that. So that's where my view stands. I think the asset class is here to stay irrespective of what taxation comes, and whatever governments want to do with it,” said Sharma.