Q: Is the bear market over, you think?

Sharma: I don’t want it to get over ever because in a bear market we make 100% in two months, which is impossible to make even in a year in a bull market. Why on earth would we want this bear market to get over? This is terrific and amazing — we see industrial production come in at 1.4% and that’s an amazingly high number in context of the -1% etc that we were running at. So we want the bear market to continue because we can make money lot faster and quicker and a lot more easily than in a bull market.

Q: Do you think a durable uptrend has started despite the moves of the last few weeks?

Sharma: Go back last year, when we were genuinely very bearish and I do remember having expressed a certain notion that there was one big rally in this market which would take us close to the highs — 16,000-18,000, something like that. That was probably after the October meltdown had happened. The fact that we are in one shouldn’t surprise us, but the fact that it has done it so quickly is a matter of surprise without any doubt. However, given the magnitude of the fall last year, there was one huge rally in the market and that’s exactly what we are seeing just now.

Going back to 2007 I was a fearless bull, and in 2008 I was a fearless bear. January-February-March 2009 I was a fearful bear and now I am a fearful bull — that’s the evolution.

We have played the markets reasonably well over the last four weeks but particularly post elections because to our mind being cued prior to the elections was fraught with danger — because just as we saw a limit-up day you could have easily seen two limit-down days had something like Mayawati come to the Centre etc. So there is no point in being extra smart in markets, sometimes you just let the first move happen and wait for a reasonable amount of clarity to happen and that big risk got taken out on May 18. Since then, our view has been that we are going to see strong uptrend particularly in the second-liners. That’s precisely the way we have seen the markets play out. I suspect we continue for about a month but globally there are enough fault-lines appearing in this rally — and any reasonable analyst must take note of those factors, just as reasonable analysts should have taken note of the green shoots in February, March or April.

So the reverse of green shoots — I don’t know what the word would be for that — is probably beginning to appear in the form of rising bond yields and in the form of economic data still not being uniformly robust. However, commodity data and commodity prices being extremely robust can probably lead to a similar situation to what we saw in the middle of last year — May-June-July — when the world was clearly slowing down but crude, copper, aluminum, commodity stocks, steel stocks were all rocking. Even inflation was doing well. And we all know how that ended. Somehow I feel we're headed in a similar direction.

Q: What about the bullish aspect of it. One month you said — you think it’s conceivable that the index goes to 17,500-18,000 before it tops off or are you saying the index won’t move that much but the broader market will do better even from here if there is one month left in this rally?

Sharma:  That is the side to which I would go to: the latter in which you will not see the narrow indices — Nifty and Sensex — do very well. They will be up but they won’t be up as spectacularly as the second-line indices would. That’s pretty much the pattern we are seeing in the last four weeks or so, three weeks since the election results came in. The Sensex has not moved up as much as the second line index has, so this big disconnect in performance will continue till the Budget or a tad thereafter. However, that’s precisely what the worrisome thing is — when you see rallies of this kind to enjoy, just as we enjoyed the November 2007 rallies or the Jan-Feb 2000 rallies. We are in that situation. I don’t think it’s like doomsday just yet but I think we are getting close to that probably in about four-five weeks time.

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