Market correction: Long way to go before we get seriously worried, says Shankar Sharma

Many market participants have been waiting and praying for a correction.

“When you get it, it will happen in a manner that you don’t like. The market has to take a breather and it is taking one right now,” he said, adding, "This is nothing but a correction and nothing more than that."

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The benchmark indexes may not reflect a major fall but it's noteworthy that the midcap and smallcap segments have seen a correction.

According to Shankar Sharma, one is never going to make serious money on a broad basis in the IPO market.

“Odd stocks here or there, you will make a lot of money but usually a well-marketed IPO is already priced to perfection. In fact beyond that and you are setting yourself up for a disappointment,” he said.

“The whole debate around the Paytm fiasco is not warranted because it is buyer beware. So Paytm is only just a symptom, it is not the real problem. The problem is investors get blinded by their own greed and they have only themselves to blame,” he added.

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When asked if the trend of pricing valuations high even for loss-making companies is ebbing, he replied, “When you look at the financials of the companies (new-age companies), the reality is this - they are tiny companies. It is just a hype around them, which is inflating a Rs 2,000 crore topline or a Rs 1,000 crore topline to a one lakh crore valuation, which is absolutely nuts because they have an app. Once you have an app then a Rs 1,000 crore topline suddenly magically gets changed into a one lakh crore valuation merely because you have something called an app.”

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“All these companies, except Nykaa, have very low promoter holdings. The pricing of IPOs is dictated by the venture capitalist or the private equity funds. For them the incentive is to price high, pump it up and sell it out in the IPO. These are not strong promoter-driven companies,” Sharma added.

The best themes in Sharma’s view still remains the midcaps and smallcaps.

“You have to play the theme of consumption - building material plays, they have done tremendous for us, we continue to like them. Innerwear companies like Dollar Industries, Lux – have done phenomenally well. Liquor stocks – Radico Khaitan, Globus. There are so many stocks out there which have benefited from the ebbing of the COVID times. There are many out there which will give you multiples of what HDFC Bank is going to give you,” he shared.