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Dark Clouds over Emerging Markets – Shankar Sharma

November 14, 2008

Shankar Sharma of First Global echoed his views that he had done in Samvat Trading – Short India, take the profits on table wherever they appear and stay Liquid.

Here is an excerpt from the report,
GDP Growth to Slowdown, China could well be in the 6-7% range, and India, in the 4-5% range, in the coming year. The reasons for this will be different. India, with its lack of internal resources, and over-reliance on foreign capital for its growth. China, for its dependence on the US for export growth.

In the next 2-3 months, Emerging Markets will be destroyed led by China and India as the architects of this big fall. The nonsense that comes out each time the market rallies 5% is as follows,

The worst is over. The governments are stringing together stimulus packages like a sausage factory. Markets have discounted the worst.etc.

India and China may between 20-30% in the next 2-3 months’ time. Of course, in sympathy, the other markets will join in, so expect pretty terrible moves from Brazil and Russia as well.

In India, it will be the index heavies, Reliance Industries (RIL.IN), and Bharti Televentures (BHARTI.IN) [He had spoken about Bharti’s rise from Rs 40 levels and there is still profit to be booked in Samvat Diwali Session] that will cause huge strife. Bet on their prices declining 20-40% over the next few months.

In China (China H Shares), Bank of China (3988.HK), China Petroleum & Chemical (386.HK), China Merchant Bank (3968.HK), China Coal Energy Co. (1898.HK)…they all will decline 30-50%.

Stocks have been really beaten down and will they Halve again ?
Remember the Tech boom? Stocks halved, then halved again, then halved again, and again,… [The HFCL, Pentafour, Pentamedia, Silverline etc etc]

For Example, to justify, Shankar’s Theory, consider the Real Estate Stocks – Unitech for example from Rs 400 to Rs 200, then to Rs 100, then to Rs 50 and currently trading at Rs 40 may strike Rs 25 🙂

These are just Mr. Sharma’s views and Mr. Rakesh Jhunjhunwala’s views are exactly the opposite.

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