2 OCT, 2012, 01.49PM IST, ET NOW
Mother of all bull markets still ahead of us: Rakesh Jhunjhunwala
In an interview with Punita Kumar Sinha, Founder & Managing Partner, Pacific Paradigm Advisors on ET Now, Rakesh Jhunjhunwala of RARE Enterprises talks about why he is bullish on the Indian equities and economic growth story.
Punita Kumar Sinha: 10 years ago you made a case for Indian equities. A decade later, are you still willing to make that same bullish case for investors for the next decade? Are returns going to be lower or higher than the previous decade?
Rakesh Jhunjhunwala: I am still extremely bullish for long term on India. The mother of all bull markets is still ahead of us. What returns you will get, only time will tell. However, the ease with which you can invest in equity, store the asset and the tax relief, no comparative asset will give returns like equity. I was and am bullish. It will take something to shake faith in the long term returns that Indian equity will give.
Punita Kumar Sinha: Why do you like the Indian equity story so much?
Rakesh Jhunjhunwala: I believe in the Indian economic growth story. India is driven by factors like democracy, demographics, skills and entrepreneurship. None of these factors are reversible. We are at a very initial stage of economic growth. Our per capita income is Rs 1500. Our GDP has a composition which is very balanced.
We have very large consumption. There is space for investment to grow. We have large savings in this country. It may take 12, 24 or 36 months, but I see India growing double digit. India will grow double digit real for a long period of time to come.
I do not believe that the growth in 2002 to 2008 was a product of the foreign capital that was coming into this country. There is no doubt that there is a lot of foreign capital waiting to come both as FII and FDI. We are going to have the capital, system, democracy, demographics, entrepreneurship and skills. Why then will money not come to India?
Punita Kumar Sinha: Over the last 20 years, the foreign investor has made money but most of that has come only from 2003 to 2007. Prior to that, we were stuck in a range and after that we have been stuck in a range. In fact in dollar terms the foreign investor has lost money. What will you say to the foreign investor?
Rakesh Jhunjhunwala: I do not agree with the generalised statement. It is a myth that you can make money only when indices go up. Even if the foreign investor has lost wealth in India, that does not mean he is not going to invest further. India is not a market where you should enter when everything is very rosy and keep buying until things look rosy.
If India is 2% of world GDP, not even 1% of the institutional wealth in the world is invested in India. We have very good trading systems, transparent regulations, some of the best regulation in the world, some of the best corporate governance. We have growth. Why will money not come? If the girl is pretty, the suitor will come.
Punita Kumar Sinha: Yes there have been compounded returns but that actually happened from 2003 to 2007...
Rakesh Jhunjhunwala: I am not saying that I am going to get returns tomorrow. I do not know when the bull market is going to occur but it is going to occur. So I am a long term investor. For today, for my portfolio, I look at 2020. There is going to be a bull market between today and 2020. We had stupendous earnings, we had no rise in the market from 1992 to 2003 and largely unutilised capacity in the economy, interest rates were coming down. That whole chemistry came together. Again it will come together in a year or two. It is going to come in bulges and so be it.
Punita Kumar Sinha: What will be your investment guidelines for the retail investors? Most of the retail investors have also not made money in the last 5 years..
Rakesh Jhunjhunwala: My advice to them is consistently invest every month in a monthly scheme. Do not try to time the markets and do not expect more than 18% to 20% return.
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