Shankar Sharma of First Global, is of the clear view that it is not the time to be sitting on cash. In fact it could turn out to be a big mistake.
“There is a huge risk in the markets and I will tell you what that is. It is that you can exit too soon. That is to my mind the biggest risk that we as investors must confront. There are times during which the risk in the markets might fall and therefore you will be left holding stocks that are going to fall and then there are markets in which the risk is exactly the opposite, that you might have sold too soon and therefore, you are sitting on cash and you don't have enough stocks. We are in that category of risk right now that we can all become excessively conservative and therefore take significant money off the table and that would probably be the worst thing you can do at this stage of the market. That is the risk of the market that you exit too soon,” Sharma said, in an interview with CNBC-TV18.
Sharma further explained, “We are in the phase of the market, which if we go back to 2004-2005-2006, pretty much everything rallied, meaning, even commodities had a very big boom and so did the entire equity pack, although emerging markets did better than developed and since interest rates were trending down, bonds also did well. So, it was one of those market situations in which every asset class did well including real estate, gold. We are in a somewhat similar situation in which if you are buying a home, you are going to make money or if you are buying crypto, you are making money and if you are buying stocks, you're making money. So, you are just spoilt for choice and therefore the wise thing here right now is not to sit on cash.”
“The wise thing here is to have adequate exposure to the various segments of the investable universe, which means equities, real estate, crypto, all of them are in a phase where it is hard to lose 30-40 percent on an aggregate portfolio, and I don't see that happening. Therefore, the next trigger for the market is simply that we will wait for whatever the FOMC comes out with or whatever commodities do, but remember, all that is noise. The trend is just so solidly up, you might have a one-day correction or a one-week correction, maybe a one-month correction but I don't think these are durable corrections to really take cash off the table,” said Sharma.
According to him, markets fall only if there is an unknown risk coming forward, just like coronavirus, back in March 2020. It came without a warning and no one could have guessed it when the year commenced.
“Markets do not fall because of known risks, markets fall because of unknown risks. I don't think there is much out there as of right now that tells me there is a massive risk that we are all ignoring,’ said Sharma.
Talking about some of his investments like CG Power, Sharma said that it has been one of the best stocks he has bought in his life. It has made more money in a fairly short period of time. “Last year when I bought it, it was in mid-teens, or something like that and at every level, I did consider selling but at every level, it has doubled, so right from Rs 15 it is almost a 10 bagger in less than a year's time.”
“I like to take big risks of this kind, wherein things are adding a lot of trouble. In this case, there was a takeover by a much-respected group but you will find different kinds of events happening that make cheap stock become expensive like CG Power and there are a few others that I have bought and all of them share similar characteristics,” he said, adding that one has to take that risks in a calibrated manner.
With regard to his investment in Radico Khaitan, he said, “It has been a more recent bet and some of the other themes have been real estate, spirit stocks and innerwear stocks- so all those stocks which were really in some senses unloved in the last 15-months’ time are where the big money has been made instead of pharma, FMCG, which generally afford you a fair amount of alpha without too much of stress; those stocks haven't done well. So you just need to keep seeing what is coming up in the horizon. All these stocks did very well and we own them.”
On Tata Motors, he said, “One has to respect the Tatas and their capabilities. They are one of the core research-driven groups in India apart from Bajaj. They are in the right space on the EV side. However, I would not like to comment on the stock because one does not know how EV will play out but if any company in India can succeed in EV then Tata is the one to bet on.”
For the full interview, watch the accompanying video