‘Excess equity returns globally to correct’: Shankar Sharma bets on hard assets

Market veteran Shankar Sharma on Saturday said the ongoing US-Iran war has taught investors one lesson, in a good way, that there are investment opportunities beyond equities. He said if investors want to survive in the long term, they have to also look at other options available in India.

He noted that while Indian stocks have been in a bear market for two years, global equities have not. "If you look at last 12-24 month returns from global markets, they have been off the chart, astounding to say the least. Those excessive returns from equities will get corrected in favour of more hard assets," Sharma said.

Sharma, who is Founder at GQuant, was speaking at Business Today MindRush & India’s Best CEOs Awards on the topic "Beyond the Markets Mayhem".

Sharma said oil is a bad asset and no one wants it to go up. But if it goes up, one has to find ways to play the trend.

"Maybe in India, you can buy ONGC. It is not a recommendation, just saying. Maybe Coal India, because alternative fuels or alternative producers of energy, maybe solar at good valuations. You have to look at things outside of traditional ways of looking at the market. Those crises will create winners," Sharma said.

He noted that gold is a good asset but caught investor attention only about 12 months ago. This is the time, Sharma said, that investors need to look at their portfolios, which could be equity-heavy, and look beyond to other opportunities, including bank fixed deposits.

Sharma said he is reasonably long-term bearish on the dollar. He noted that Iran is now settling crude oil trades in yuan and so is Russia.

"There is a growing part of oil, which is the largest traded commodity in the world, going outside the dollar system. The whole petro-dollar itself is now coming into a big question mark. These are big shifts happening. We just need to find ways to play those big shifts," Sharma said.

The session was moderated by Shailendra Bhatnagar and Aabha Bakaya. Market veteran Madhusudan Kela, who is also the founder of MK Ventures, was another panellist at the session.

On the dollar, Kela noted that the gold price rally in the past 3-4 years was not led by geopolitics or wars, but by buying from central banks globally. He said the recent fall in the safe haven despite the ongoing US-Iran war could be due to the fact that the incremental ability for central banks to put more dollars into gold might have diminished.

"Who knows some of them may even be liquidating gold to face up to this crisis," Kela said.

Sharma said the ongoing crisis has shown investors that while the Indian economy looks strong on the surface, it is not that strong below the surface.

"This crisis has exposed our fault lines. Oil we always knew, but will this chain reach fertilisers, even I had not figured it out. Will household LPG become a problem? This has exposed a big crater underneath our otherwise very good economy," Sharma said.

Overall, Sharma felt there is just too much equity focus among retail investors and it may or may not work every time. He suggested the need for basic risk management.