Amidst India-Pakistan Tensions, Shankar Sharma Advises Investors to Adopt a Defensive Investment Strategy. He Highlights the Multi-Asset Approach as the Most Suitable Strategy Under the Current Circumstances.
Stock Market: Indian investors are currently concerned about the escalating India-Pakistan tensions and their potential impact on the stock market. Shankar Sharma, a senior investment analyst and founder of GQuant Investech, believes that the market doesn't react instantly to such geopolitical situations.
He clarified that the market takes time to understand the true nature of any conflict—whether it's a small-scale incident or a full-fledged war. Until it's clear whether it's a limited event or will escalate into a wider crisis, the market tends to remain relatively calm.
Bull Market Enters its Final Phase
Shankar Sharma also stated that the bull market, which began after the COVID-19 pandemic in 2020, is now in its final stages. According to his 'Lake of Return' theory, the prospects of high returns in Indian stock markets for the long term have diminished.
He believes that the bull run, which has yielded significant profits for investors so far, is slowing down, and investors should adapt by shifting towards new strategies.
Defensive Investment Strategy Now Necessary
Shankar Sharma advises investors not to rely solely on equities. Instead, they should adopt a multi-asset approach. This approach should include:
- Fixed income options alongside equities
- Investment in gold
Focus on Defensive Sectors
He suggests that investment has become a defensive game, not an offensive one. This approach will provide investors with a safety net during the challenging times ahead.
Higher Risk in Midcap and Smallcap Stocks
Smallcap and midcap stocks have delivered exceptional returns in the past few years, but they are now the most vulnerable to potential declines. According to Shankar Sharma, these companies delivered approximately 48% annual returns post-pandemic, a rate that is unlikely to be sustainable.
He cautions that the stocks that yield the highest profits can also inflict the most significant losses during a crisis. Therefore, investors should exercise caution.
