According to Shankar Sharma, India is still a fantastic small-cap and decent large-cap market

According to Shankar Sharma, India is still a fantastic small-cap and decent large-cap market

According to Shankar Sharma, India is still a fantastic small-cap and decent large-cap market

Sharma claims that in order to fulfill the fiscal deficit objective, the interim budget's capital investment must be reduced, which would mostly affect largecaps.

This government's reliance on the stock market is one feature I like. According to Sharma, the company is adept at using language that appeals to the market and use it extensively when making announcements about budgets or policies.

Veteran investor Shankar Sharma claims that significant improvements were not anticipated from the interim budget.

Ahead of the April or May Lok Sabha elections, Finance Minister Nirmala Sitharaman delivered the vote-on-account, or interim budget, on February 1.

The interim budget seems to be a continuation of the current policy. I have some doubts about their ability to meet the 5.1% expected budget deficit. We'll see how the year unfolds, but it seems a little aggressive," he stated in a post-Budget interview with Moneycontrol.

Sharma provides an explanation for his continued search for smallcap chances. Revised passages:

How do you feel about the budget initially?

We couldn't really anticipate a "big bang" since this was only a vote on account; instead, they stuck with the terminology and sound characteristics that the market finds appealing. This government's strong reliance on the stock market is one feature I admire. It is well-versed in the language that the market finds appealing and makes extensive use of it when making any kind of budget or policy announcement. Ultimately, there seems to be a great deal of policy consistency. I'm not quite convinced whether they can handle it at the projected 5.1% budget deficit rate. We'll see how the year plays out, but it seems a little ambitious. Otherwise, the Vote on Account method is a fairly simple and uncomplicated one.

The market seems to have accepted the news with little enthusiasm. Does this imply that the stock prices already took everything into account?

Of course! I believe that this also included the rise in capital spending. Given that the fiscal deficit number seems to be pretty aggressive in terms of cutbacks, I don't believe the market had built in any slowdown on the capital investment front. Even while a reduction of 0.8 or 0.7% seems significant, it will unavoidably be made for one of two reasons: either more income, reduced capital expenditures, or a combination of the two. Throughout the course of the following 12 or 13 months, the truth will become evident. If income projections are not met, capital expenditures will need to be reduced in order to close the budget deficit. This, in my opinion, will affect the market's perception.

What will be the catalysts for rising stock prices that we may concentrate on going forward?

India, in my opinion, is still a growing small-cap market. That's really what I'm concentrating on, as the Budget doesn't indicate that largecap stocks will do well. Reducing capex is a necessary step to address the budget deficit. Furthermore, capital expenditure growth cannot continue at such a rapid rate if the straightforward route to a budget deficit of 4.5% in 2026 is to be followed. This implies that there will be a significant effect on largecaps if the capex amounts in your next budget are reduced. Not so much on smallcaps. India is still, in my opinion, a good small-cap and mediocre large-cap market.

The majority of fund managers are placing bets that, as a result of this global trading arrangement, FII capital would start to pour in and boost largecap stocks.

huge AUMs are clearly the source of the majority of fund managers' income, and huge AUMs must inevitably be in large corporations. As in the last several years, it is a terrific moment for individual investors to be in smallcap stocks. Nothing is changing, in my opinion.

Which kind of midcaps and smallcaps are you thinking about? Many of the equities that have seen significant increases are linked to government involvement in one way or another.

Even if I seem too old to be considering it in light of the present circumstances, I have no interest in having a connection of any sort with the government.

However you choose to view the equities, the tiny and midcap segments of the private sector seem very costly.

I've always thought that valuation is an overappreciated investment tool. Over the last 12 months, a number of the firms in which I invest or want to invest have reported startling numbers. The seeming high cost was really not so high, given they are businesses with earnings of up to Rs 2500 crore, where things may change quickly. Since my businesses are new, they have room to develop quickly. They are able to steal market share from larger businesses. Despite the fact that some of their sites are heavily secured, they are luckily independent of government intervention. I am thus content in my forest.