Rakesh Jhunjhunwala of RARE Enterprises, a high-profile investor, talks to Rajesh Bhayani on the state of the secondary market and the hype around IPOs.

What is the market outlook at current levels?

The economy is growing at a good pace. GDP growth is at 19 year high despite government taking hard measures to curb inflation. And remember, hardly 1 per cent of our population invest in equities. As the investing population rises, more money will flow into the market.

What about the risks of a strong rupee and rising crude price?

A rising rupee may put pressure on IT margins, but rising volumes will offset negatives. Crude oil prices were high last year also but the dollar was 45 then, which is 40.5 today... consider that also. The world has managed to absorb high crude oil prices.

Aren't valuations looking stretched?

Who decides the valuations and who can say which level is reasonable? I think, if stocks are giving better returns compared with competitive investment avenues then why I should withdraw my investment from equity. Yes, earnings may moderate from their higher levels.

So you don't see a big correction happening?

I am not worried about corrections. We have seen the market growing from 3000 points to 14500 points in the last four years. Certainly, Sensex will not be 60000 by 2010. It cannot. I think these type of doubts [that valuations are stretched] are in mind and they not in reality.

But there are risk factors...

The India story is irreversible. Whatever the risks, they can at most cause delays. I think nothing can change India's growth prospects. If the market has managed to rise from 3000 to 14500, what is wrong if it remains in the range of 12000 to 15000 for a year?

What about other investment avenues such as commodities and real estate? Is real estate turning into a bubble?

If one wants to invest in commodities he can invest in commodity shares. I don't see a bubble in real estate. Again, who decides what is reasonable and what high level is? But, real estate prices may see some correction.

How is the IPO mart shaping up?

Money is there in the market. Mega issues will also get absorbed. But if you look at issues listed in the near past, most of them are trading at a discount to their issue price. This may result in a reasonable pricing of IPOs.