In an exclusive conversation with ET Now, Big Bull Rakesh Jhunjhunwala says that the next 3 months are likely to be very difficult period for the markets, but he is extremely bullish on their long-term prospects.
Some part of the interview
ET Now: Indian markets have been stuck in this range from last six months. Do you think we could remain in this range for an extended period of time?
Rakesh Jhunjhunwala: The next three months are going to be a very difficult period for the markets. The chances to break down to me seem to be greater than the chances to break up, at least in the next three months.
ET Now: Do you see 5000 acting as a base for this market?
Rakesh Jhunjhunwala: That is difficult to say, but I would think so, 4800-5000 is a level where markets will surely find a base, strong support which goes there.
ET Now: So what is the biggest risk for Indian markets currently?
Rakesh Jhunjhunwala: The headwinds are on Indian markets, the most important thing is inflation. Because inflation controls everything, interest rates, growth and the second headwind is the government inaction. Although we have very good people at the helm of government and they know what needs to be done, but politically they are not able to give any consensus at all. There was hope of some big reform after the elections, but nothing has happened up until now. And unless we get some kind of a reform in the subsidies and some kind of a clear roadmap for the DTC and goods and sales tax, GST, the markets are waiting for that.
ET Now: But would you bang the table and say that or predict rather that in next 3 years, Sensex will be at least 50% higher than where it is?
Rakesh Jhunjhunwala: I am extremely bullish in the longer period. Three months unless and until we get clarity on the monsoons which we will get by August end, and we will see what kind of government action comes through. Until then, the markets are going to have a downward bias. Three years, 5 years, 10 years, I am extremely bullish.
ET Now: Do you think the golden period for Indian equities is not over?
Rakesh Jhunjhunwala: It has not even started.
Why do you say that?
Because the Indian economy is going to grow for the next 30-50 years and that growth is going to surpass everybody’s expectations. In terms of consequence of that growth, equity and with such low exposure to equity markets, local investors and India this year will save about $650-700 billion. It is legitimate to expect that at least 10% of that should come to equity markets, but we are not seeing that at all. It will come with time. So the golden period is still ahead.
Which to your mind could be the biggest moving part for next 12 months?
Inflation and government action are the most important points.
What are your thoughts on banks? There is a sense that banks may be markets also are mis-pricing growth?
No. Banking will grow in India, but the question is efficiency. If you look at SBI, there is growth every year, but the cost to income ratio just does not go down, and therefore that financial efficiency never comes through. Growth will be there, there is no doubt about it.
Do you like the private banking space, especially the smaller mid-cap private banking space?
I have two investments in Karur Vysya Bank and Federal Bank. I intend retaining them.
It is interesting if I look at your investment portfolio. You do not own any Nifty 50 or Sensex 30 stocks. Why is that?
I hope that some of those stocks which I own will become part of the Nifty or the Sensex.
Apart from Titan, which other stock has the possibility of being part of Nifty 50?
Lupin. Lupin is a fairly large company now.
What makes you so bullish on Lupin?
It is growing well, they have done well. They are growing well. They are doing well in Japan and America.
If I look at your recent investments, Delta Corp and Orchid Chemicals, are you now betting on low concept stocks and more visible stocks?
No, I do not think so. I am really looking for that. When I bought VIP, I have been looking for a five to seven-year angle. Even Relish, Orchid Chemicals and Delta Corp are long-term bet. These are four investments I made in the last two years. It has not essentially changed.
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