Shankar Sharma flags 2 key risks for market, says book some profits ahead of general elections

Market veteran Shankar Sharma says the domestic stock market may test investor temperament sooner than later, given general elections are scheduled in May, next year. In an interview to BT TV, Sharma said the market may turn a bit wobbly six months prior to elections and that investors should take some profit off the table.

"Election outcomes are always uncertain. No matter what polls say, it is still a voting machine that determines the outcome. Till that day, many things can happen. We are still 7-8 months away and a lot of upheavals can happen. Its a genuine concern" he said.  

Sharma, who is the Founder at GQuant Investech, said the market will not wait for the elections period to display some degree of caution. It would turn cautious, 5-6 months ahead of time, "which is the period that we are entering into. It's not to say there is a problem. All I am saying is that there may be wobbles, be prepared for it. Buy some insurance by taking some cash off the table" he said.  

Besides, Sharma said another risk that he sees for the market is the unsecured component of lending by banks, NBFCs and fintechs, which is fuelling consumption in India. He noted that a large part of retail loans are unsecured. "When people start to spend based on credit and not earnings, that can be a problem, 2-3 years down the line," he said.

Sharma said he sees the trend as a problematic area, even as it may or may not blow up in the face. "It's always good in investing to know the risk. Once you know the risk, you can account for the risk and adjust for it. Not to recognise risk is the most stupidest thing in the world. Risk is everywhere, read it and deal with it," he said.         

Sharma, meanwhile, said fear of missing out (FOMO) is the worst enemy in life. He gave an example of cricket, saying great batsmen do not regret missing a full toss, knowing well they can have a similar delivery ahead. "That is the mental model you must have. (FOMO) is the worst enemy in life, forget stock market," Sharma said. 

Sharma, meanwhile, said one should not waste time tracking foreign or domestic fund flows, as they have absolutely zero impact on stock markets --they are just noise. "It is because buying always equals selling. If FPIs have sold Rs 5,000 crore stocks, somebody else has bought Rs 5,000 crore worth of stocks. "The less noise you have in investing, where you focus on data which is relevant such as company fundamentals, the better it is," he said.

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