There are hidden threats lurking beneath India’s bull market, but ace investor Shankar Sharma believes the biggest threat is overcapitalization caused by the insatiable greed of merchant bankers and corporate executives. I believe.
“The single biggest threat to this bull market is greedy merchant bankers and operators who encourage unwise promoters to raise excess capital and permanently destroy balance sheets through overcapitalization.”Ace Investments Shankar Sharma of the house wrote in a post to X.
He reiterated that these stocks will fall 90% in the next bear market.
The problem is that in conditions of market optimism, promoters are tempted to raise capital beyond their immediate needs, and this is largely persuaded by merchant bankers and business owners. This is likely to leave a permanent scar on the balance sheet from the burden of excess capital.
Sharma believes that if the tide turns and the market enters a bearish phase, the stock prices of overcapitalized companies could plummet by up to 90%.
Meanwhile, the Indian stock market benchmark indices Sensex and Nifty 50 witnessed high volatility and fell over 0.5 per cent on Tuesday.
Read here: Stock market today: 5 reasons why the stock market is falling ahead of Sabah election results
Selling intensified across the market, with Nifty Midcap 100 Index and Nifty Smallcap 100 Index each rising over 2%.
The India VIX index, which measures volatility in the Indian stock market, has risen nearly 35% in just four sessions in May so far, after rising just 0.30% in April.
Analysts attributed the market decline to high valuations in the Indian stock market, selling by foreign institutional investors (FIIs), pre-election uncertainty and mixed fourth-quarter results so far. There is.
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Disclaimer: The views and recommendations above are those of individual analysts or brokerages and not of Mint. We recommend checking with a certified professional before making any investment decisions.
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Published: May 7, 2024, 1:37 PM IST
