New Delhi. Shankar Sharma, a well-known voice of India’s investment market, says that the current economic slowdown should not be taken lightly. According to him, this is not a short term phase and it will take time to come out of it. It would be too early to expect India’s growth story to accelerate even in 2026. According to Shankar Sharma, low inflation is definitely a relief for the common people, but it is not good news for the equity market. When inflation remains low, the pricing power of companies becomes weak. This has a direct impact on margin and profit growth, due to which stock market returns come under pressure.
He believes that mid-cycle rallies may be seen in the market from time to time. However, this rally will not be the beginning of a new and strong growth cycle. A real and sustainable recovery requires a solid recovery in the economy and earnings, which appears to be a long way off.
Concern about tax collection and fiscal deficit
Talking to business news website Mint, Shankar Sharma said that the government’s tax revenue is also not increasing as per expectations. The projections made regarding capital gains tax and STT are not being met. In such a situation, to keep the fiscal deficit under control, the government may have to increase tax on oil or cut capex expenditure. Both options are challenging for growth.
Why did India lag behind in global returns?
According to him, this year both India and America have been in the bottom quartile in global market returns. In contrast, markets like Europe, Latin America and Korea have performed better. This difference is clearly visible in the decisions of foreign investors.
Why are FPIs withdrawing money from India?
Shankar Sharma says that foreign investors see about 8 percent nominal growth in India. After deducting tax, it comes down to about 7 percent and if the rupee’s annual weakness of about 4 percent is added, then the returns in dollar term are very low. This is the reason why FPIs are leaving India and looking towards other markets.
Rupee weakness and India’s role in global trade
On the fall of rupee, he says that despite the large forex reserves with RBI, it is not easy to control the currency for a long time. The real problem is that India is not that relevant in global trade. Indian companies are mostly dependent on the domestic market and do not make things that the world needs rapidly.
Where is Shankar Sharma bullish?
At the global level, Shankar Sharma is more bullish on Latin America, Europe and especially China than India and America. According to him, technology, work ethic and global ambition appear stronger in China. He likes some small tech stocks in India, but also considers them high risk.
What to expect from Budget 2026
Regarding Budget 2026, Shankar Sharma has a clear opinion that the government will either have to make a substantial increase in capex or cut capital gains tax. According to him, without taking a strong decision on either of these two, the tired Indian bull will not be seen gaining momentum again.
