While economic activity has picked up across the world, there seems like it would take a lot of time for things to return to normal. Agreeing with this notion is Shankar Sharma Vice Chairman and Joint MD of First Global, who spoke about the road ahead for the equity market with CNBC-TV18.

Speaking about the US market, Sharma said, "From the first week of April, or lets say from the third or fourth week of March up until now, it has been just an amazing run and I worry about this. As a firm and as an individual we are not happy at all with this. We are satisfied but we are not delirious.

"We always watch for where is the risk in my portfolio, where can we go wrong, where are we becoming complacent, these are the questions we keep asking ourselves but retail investors opening up brokerage accounts, going and buying a bunch of stocks, they have no such fears. However in the last 5-7 days you have had a brutal fall, it has decimated numbers. So it has been a very rough ride for everybody who thought it was easy to make money."

He noted, "I think there is definitely going to be a shakedown and one needs to be extremely risk averse at this point in time. We are participating, but we have bought insurance, we think it is time to be a little conservative rather than be the cowboy that one could afford to be back in March."

Speaking of small caps he said, "Right now if markets tank, I am not even talking of bear market, I don't think that is coming but a 5-8 percent cut in market can mean a 30 percent drop in stock prices and I think that brunt will be borne by banks and second are the small caps. 2017 was the last time we saw some degree of small cap bull market. I think that was a 67 percent rally in 12 months. We have seen the small cap index from April is up 50-52 percent. So what the whole year delivered in 2017 has been delivered in 6 months' time. So I worry about that, we know how brutal they are when they turn against you, we know how many funds got wiped out in 2018, so I am mindful of that risk."

On Indian market and economy, Sharma highlighted, "As far as the economy is concerned I think the worst is over from a big shock but for things to normalise and go back to even a 5-6 percent normalised GDP growth rate, I think there are a lot of bumps along the way. I am not sanguine about the economy as much as I am sanguine about the stock market because I think the two have diverged and I think that divergence will continue for the foreseeable future. I think there is a long and painful road to recovery for the core economy."

Watch the video for more.

First Published:Sept 10, 2020 7:11 PM IST