Amidst the volatility in the Indian markets right now which are adversely impacted by the Russian-Ukraine crisis, ace investor and market veteran Shankar Sharma advises investors to stick on to smallcaps and welcome the valuable lessons the market is teaching us right now.
Sharma in conversation with Moneycontrol apprised that whatever the markets are going through right now due to the geopolitical tensions in Russia and Ukraine, it is quite precedented and just like other markets around the world, India will also suffer.
He pointed out that whenever 'war' or 'near-war-like' situations arise, three things definitely happen- markets sell-off, treasuries might rally and there's a spike in oil prices. On February 22, International oil prices surged close to $100 a barrel on Tuesday after Russian President Vladimir Putin sent troops into Ukraine.
Check out all live updates of the Russia Ukraine crisis here
Sharma apprised that the wisest decision at the moment would be to invest in small-caps, even though market volatility hits it much harder
"What gives you maximum pleasure, will give you maximum pain", Sharma coined cheekily saying that while there's additional risk in investing in small caps, no other area can give returns as high as 5 or 10 times of what you have invested.
He also said that investors and traders will have to really fish for the good smallcap companies as most of them happen to be dodgy. For doing this, they will have to go beyond just checking balance sheets.
Read more: Gainers & Losers: 5 stocks that moved the most on February 22
On what sectors must one invest in at the moment, Sharma suggested the good old and established sectors of IT Services and Chemicals. He also gave an assurance for well-chosen real estate stocks, which will give good returns, barring times of market volatility.
Finally, when asked about what is worrying him about the markets right now Sharma said it's the easy liquidity that we have gotten used to and the withdrawal symptoms one might face if things were to change
"An easy money policy started after the GFC (Great Financial Crisis) of 2008 and the cycle that ran successively for 10-11 years fueled by rate cuts. Is there going to be a complete reversal of what we have gotten used to which is easy money, abundant liquidity... Withdrawal effects of that worry me", he shared.
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