Bull market ageing, could lose steam from here, says Shankar Sharma

The Indian equity markets have had a good run in the past four years, and now, as it enters into fifth year, the bull run could lose steam, said Shankar Sharma, founder, GQuant Investech at the recent Business Standard Manthan in New Delhi on Wednesday.

Sharma was apparently tracing back the start of the bull run to March 23, 2020, when the markets had hit a low due to outbreak of Covid-19 and started the upward journey from there.

"Data is clear that no bull-market lasts beyond five years. We are entering the fifth year where, typically, the bull markets become tricky, moody and unpredictable. Had this been a young bull market (into its first or second year), regulatory issues regarding the mid and smallcaps would have been shrugged off by the markets. These problems for an ageing bull market tend to draw blood," he said.

According to Sharma, ideally a "Horse" should be used as an indicator of the rally seen in the markets as it can run long distances at a fast pace. A "Bull", he said, can at best do a short sprint and needs occasional breaks/pauses to catch its breath before charging again.

Meanwhile, midcap and smallcap stocks have taken it on their chin in the past few weeks as both the indices saw sharp cuts after the market regulator, the Securities Exchange Board of India (Sebi), warned against the excessive valuation in some of the counters in these two segments. The cuts in individual stocks that comprise these mid and smallcap indexes have been much sharper.

Sharma, meanwhile, feels that both Sebi and the Reserve Bank of India (RBI) have done a good job. He believes it was "about time" that Sebi voiced its concerns as regards the "froth" in the mid and smallcap stocks.