Sensex could dip below 10K levels: Shankar Sharma

Shankar Sharma of First Global said poor IIP numbers and a sell-off in metals is the beginning of a sharp correction. "Newsflows are still poor. The markets have still not bottomed out. We don't see the Sensex rising beyond 12,500 in the current move and expect a further downside in October. The Sensex could head back to 10,000 levels, and may even dip below that."

According to Sharma, markets won't re-conquer fresh highs in the next three years. "The environment in equities is likely to be tough over the next few years. The situation in the US is getting worse. The S&P 500 could dip to 600 levels. We see a 40% downside in emerging market equities."

On the rupee, he said the rupee is also not secure at current levels, and may test new lows. "Even if emerging markets stabilize, currency problems will worsen the impact."

He feels RBI's last few CRR hikes may have been excessive. On liquidity, Sharma said India had a lot of liquidity but it was sucked out by RBI. "The central bank may be slightly behind the curve in freeing liquidity. Sentiment in market has soured, so fresh liquidity may not work. The Monetary Policy may not change the course of downward trend."

Source: Moneycontrol