See 40% upside in 2-3 months: Shankar Sharma

Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets

Q: Do you think India can outperform because of what has happened over the weekend and money flows might actually come in more to this part of the world because of the conviction that, medium term, the shape is changing?

A: Yes definitely. I think that would be a reasonable call to make that India's problems have been largely political. The macro part also suffers because of the politics. In pure coalition politics, it becomes very difficult for the Prime Minister to impose certain performance parameters and guidelines on the individual ministers who are not part of the large party. So it is not like a class monitor who can dictate terms and conditions to various parts of the class. The PM in a coalition is nothing but - he is just like a broad father figure - because if from a coalition partner, the minister is not doing a good job, there is very little that the PM can do. Now fortunately you can hold ministers to strict accountability and by whatever I have read in the papers and seen on television that Congress is pushing even the coalition partners - whose bargaining power is a lot lower - to bring and nominate younger leaders rather than the old fossils. So even because of the Congress, the fossils will get less of a chance, the younger generation will get more of a chance and also they can push even the coalition partners to give them better ministers rather than the old men the last time.

In Bihar and in Uttar Pradesh (UP), the stats were that none of the contestants with criminal backgrounds got elected. This is not just about the stock market, the electorate this time has given just a very intelligent verdict. That is an amazing statistic that the voter gave everybody a chance. Now he has decided that I want to go in favour of an all-inclusive party. That is even more significant than 20% pop in the market.

Q: Last we spoke, you made the point that you weren't completely confident about the fact that the market may have put the worst behind it i.e. that it will not return to the bottoms that it saw earlier. Barring an October-like situation, do you see that the market may have put the worst behind it?

A: The further you get away from the lows, the less the probability. That is common sense. India may well have done that given that the government's first 100 days usually are especially not hobbled with the Left, they will do a lot of at least the headline announcements will be quite positive. So in that context the markets have more bias to trade upwards rather than downwards. But I don't want to think that far out just yet whether all bottoms are in place or that even a near retest of the bottom is completely off the table. I think the probabilities have diminished over the weekend dramatically without any doubt. Anybody analyzing the market has to recognize that this has been a game changer. But I think the world economy is still struggling, India is still struggling on the macro numbers, we have seen IIP numbers, we have seen export numbers. I don't think the challenges have gone away and given the state of the fiscal deficit, those are problems still. I think to say 7,700 gets reached that easily probably not but I would still say that it is still 10-20% in probability that we might in the event of very bad numbers here or globally we might get somewhere closer to that. Now even 9,000 seems to be a distant number.

Q: You have been highlighting how some of the worst sectors in the market have been doing the best. Do you think this event is positive for many of the worse sectors who might get access to liquidity among other things now?

A: Yes, infrastructure and real estate have pretty much similar business characteristics. They build things and they sell them. So, yes, obviously this is very reflexive that the stock markets - as George Soros says that fundamentals influence stock markets but stock markets also influence fundamentals. So the higher the stock price, the more the chances that the company remains in business, doesn't go bust, gets access to capital and we have seen that happened over the last one month's time. So yes, good stock market helps companies and you could see a lot of struggling companies get more capital and that will be good for companies executing projects for those companies. So if you were a struggling real estate developer and you have given contracts to L&T to build your apartment and you get money, then L&T gets benefited out of that or an IVRCL gets benefited or an HCC gets benefited. That segment at least for a while will have some kind of honeymoon period.