What Rakesh Jhunjhunwala & other Money Monarchs expect this year?
| SI Team / Mumbai January 30, 2006 Seven stock market stalwarts debate the prospects for Indian stocks in the annual round-table organised by Capitalideasonline.com. |
| Ramesh Damani: Good evening ladies and gentlemen and welcome to this round table. In the comedy “Shall we dance” actress Susan Sarandon, talking to an acquaintance, poses the question, “why is it that people get married?” People get married, she muses, because they want a witness to their lives. Fast forward to 2006. The romance with Indian equities is in full bloom and today we assemble, the great witnesses to what we call the great Indian bull market. |
| In this cathedral to capitalism, in this hallowed hall, the soul of the Indian stock market, if you will, when this group of witnesses last assembled in 2003, the Sensex was at 3000 -- it has now tripled; the number of Indian companies with a $1 billion market cap has crossed 75 and India's market cap is over $500 billion. |
| In 2003, when we asked our panelists what they thought of the market, the opinion was unanimous and prophetic. They all said “bull market ahead.” What are they saying in 2006? |
| Is India today where Japan was in the 1960s? Are these valuations sustainable? |
| Can oil prices or terrorism or the Iran American conflict derail this global economic expansion? These are just some of the questions that we are going to pose today. And as usual, we start with Rakesh because you can't keep him quiet for half an hour! |
| In November 2003, Rakesh said I am an India bull and we are just watching the trailer. My first question today is: Have the hero and heroine met or are the credits rolling? |
| Rakesh Jhunjhunwala: I would say the trailer has given us confidence that the movie is going to be very good. I think the momentum in the Indian economy now ,is like never before. With every passing day, every Indian is getting more confident. Of course, this is being helped by the fact that he is making money when he invests in the markets. So, I would say that the trailer is over. About the hero and heroine – I don't know. |
| I'm not a scriptwriter but my feeling is that at this juncture, there is good growth momentum and people are confident that this will sustain. I think that's important because that itself will contribute to the growth of the economy and the momentum. |
| Ramesh Damani: In terms of the movie analogy, are we at the interval? |
| Rakesh Jhunjhunwala: I think we are just seeing the titles. After the trailer, you see the titles, no? I am not some political theorist or economics professor, I am share bazaar road cheap. |
| But I feel that kind of prosperity towards which India is marching and the manner in which it is marching is unbelievable. It's not a view because the index is 10,000. Even if the index falls to 7000 tomorrow, I will hold the same view. |
| Ramesh Damani: Rakesh, is there anything you'd like to see in the budget? |
| Rakesh Jhunjhunwala: Sometimes I wonder about the reforms we have had the last 24 months. Right? Now we had a very skillful Finance Minister who has been able to meet so-called social needs, through small doses of taxation. We have had VAT. |
| What I feel now is that governments are inconsequential. And I draw comfort from my study of history which tells me that when a democratic society decides what is in its favor, the happening of that is inevitable. There are Communists in Delhi and capitalists in Calcutta. Every politician realizes the inevitability of reform. |
| And what will the government do in the budget? They will tinker a bit here and there. I only hope that the FBT goes and that the STT does not increase. You know the government of India might never have collected even Rs 1000 crores as long-term capital gain tax. |
| And they have collected Rs 3000 crores through STT this year. And they want to increase the rate? The only thing that is disturbing is that something which pays is being taxed to death. My only wish is this should not happen. |
| Ramesh Damani: Right. Rakesh, you know, three years ago there were many doubters even in this audience about whether India was heading for this long structural secular bull market you talked about so passionately. Are you astonished at what has happened? |
| Rakesh Jhunjhunwala: You know sometimes I feel like singing “ki shayed tu aise hai jaisaa maine socha tha.” Right? By God's grace things have panned out as I envisaged them. But the true believers will be seen when the index corrects by 2000 points. |
| Ramesh Damani: Doesn't the pace and the resilience astonish you? |
| Rakesh Jhunjhunwala: I personally feel that at this level, we are entering the first stage of the domestic inflows. The moment the investors gain, they will invest more. And I think there is humungous domestic money to come. Unimaginable. You know Indian savings in 2010 is projected to be $410 billion. |
| If 10 per cent is to flow, it will be $40 billion. So even if the index goes down 1000 or 2000 points, as long as India's growth story continues, the economic story continues, I think the market is just going to march ahead. Of course there will be periods of correction. We don't know. |
| Ramesh Damani: Rakesh, what would be the themes that are important for the market in 06? |
| Rakesh Jhunjhunwala: Two things worry me. First , the world economy, because I think American consumption has to come down. How it will come down, how global currencies will realign, what effect is it going to have on global demand, that's going to be very important. |
| The American economy is going to tank in my opinion. When that happens, it will have a big effect on the sentiment towards equity. So we must be alert. Second, I think oil prices beyond a point are going to lead to higher inflation and higher interest rates. |
| Corporate profit growth in India may slow down. But if the essential story of an improvement in quality of profits, higher consumption, and a growth rate of 8 per cent is intact, I don't think a fall from 25 per cent growth in profits to 15 per cent is really going to disturb the market. It is events outside of the market, which will shake the confidence and also affect corporate profits substantially that would worry me. |
| Ramesh Damani: Rakesh, net net will 2006 be another positive year? |
| Rakesh Jhunjhunwala: If you ask any Dow theorists, they will tell you that if the market goes up for 3 days then it goes up for 5, and if it goes up for 5 days continuously, then it goes up for 8 etc. But it is reasonable to expect that this could be a negative year. But what difference is that going to make? |
| My investments have a entry value and a terminal value. And while trading, the screen talks to you and tells you. So badega to lenge, ghatega to bech denge. If it corrects, so be it. It's not going to affect my investment thoughts. |
| Ramesh Damani: You know it might correct within the year but overall we are still in the structural secular bull market? |
| Rakesh Jhunjhunwala: Very much. And I don't think something can slow it. |
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