Inflation remains the biggest risk to the Indian bull market and the Reserve Bank of India will not raise rates even if prices spikes, Shankar Sharma, VC and Joint MD of First Global, has said.
"I don't think RBI will raise rates. Inflation is a risk but it is an acceptable risk. We are comfortable with this," Sharma told CNBC-TV18.
Talking about the rally in mid and small-caps, Sharma said they were gaining as liquidity was flowing to the riskier space of the market, the mid and small-caps.
"We have optimistic about this space. Because of the loosening of credit last year after COVID-19 and a big bear market prior in smallcap, this was the area that had the biggest headroom to rally and I don't think it is done yet. I believe it is a decent place if you choose wisely," said Sharma.
The Indian market has performed poorly and the ongoing rally had a long way to go, he said. "India has been a poor performer until 2020 so. In January 2008, the Sensex was at 21,000 and today is at 50,000; the compounding is only 6 percent which is less than SBI's fixed deposit. Preceding 10-12 years has been a complete disaster in terms of returns. Now the current rally has a long way to go," he said.
Talking about emerging trends, Sharma said innerwear and hosiery players were looking attractive as their demand has risen after COVID forced people to stay home.
Sharma said he was skeptical about the FMCG companies not because of the valuations but because e-commerce was changing consumer behaviour. "E-commerce is the new battleground that FMCG companies have to fight on," said Sharma.
Talking about the value part in the market, Sharma said he stayed away from the highly-priced part of. "The important thing is when there is inflation, the biggest hit has been taken by the highest valued stocks," he said.
Several steel and non-ferrous companies presented a great buying opportunity and many commodities were coming out of a multi-year bear market.Disclaimer: The above report is compiled from a CNBC-TV18 interview. Moneycontrol advises users to check with certified experts before taking any investment decisions.