ET Now: Markets are going to resume trading on Tuesday, what are the cues to watch out for, I am guessing next week the Monetary Policy Committee outcome is going to be the big trigger?
Rajat Sharma: To be honest, I do not think whatever happens at the monetary policy meet will have much impact on the market because as everyone has been saying,the markets have been overvalued for a very long time.
The market was available at 14-15-16 kind of PE multiples also and today they are available at 25-26. So, one way or the other, at some point markets will find a reason to fall more from where they are.
At some point, valuations have to correct themselves for these markets to be justified. The only other way where the valuations can cool off is if earnings were to start improving very rapidly. Now with the way things are going, too much is happening too fast under this government; demonetisation happened, GST happened and right now there is utter confusion about how to do tax filing. I do not think in the next two-three quarters, maybe longer, earnings are going to improve in any meaningful way.
No one can predict. what the markets do on a week-to-week basis but from the medium-term perspective, my view is fairly negative on the markets. Much as I would like to say that I am positive on stock x or stock y because this is what I do for a living, it is right now looking really bleak to be honest.
ET Now: The government is doing too much too fast… is that good because once and for all, bite the bullet and take the impact on earnings?
Rajat Sharma: You know I would hope so. I hope this would be good and at some point, there would be clarity. I for one, would be happiest if the government was able to collect higher taxes and government coffers were rich because that is where a lot of the infrastructure companies are. I have been positive on these as that is where infrastructure companies start getting projects.Only the government pays for these massive infra projects to build bridges, roads, ports or dams. But I do not see that happening.
To be honest with you, if you think about it, GST implementation happened and right now going by the tax collection figures, it is not as bright as everybody thought would be. Everyone thought that this year the government would collect a lot of taxes.
In fact, the tax collections have gone down after the implementation so I do not see how capex cycle can revive from the government side.
I hope at some point, things would look better. GST had been pending for a long time, they have taken the bull by the horn but really nothing is really happening. I do not see how as some people keep saying that by December or by March, things will improve. How will the earnings improve? I am actually happy to wait and see the earnings actually improve. I would be happy to buy growth stocks at a higher price but right now there is absolutely no reason why I should be looking to buy any stocks really.