We have made a bottom, and the US credit market is the only worry now, according
to Rakesh Jhunjhunwala, ace investor and partner, Rare Enterprises. The recent
correction in the domestic stock market was largely because it had gone ahead of
itself and the mother of all bull markets is ahead for Indian equity investors, he said
in an interview with ET Now. Edited excerpts:
Are you bullish on the domestic market or bearish?
To my mind, we are at a bottom, or we are near a bottom, because expectations
are valid. There are not many speculative positions in the market. A lot of the
selling has come from FIIs, but it has been absorbed by the local institutions for the
first time. There is a lot of flow into Indian mutual funds, which is only going to
accelerate. The only joker in the pack could be, I think, the dollar. The dollar has
peaked. Short dollar is a very good trade against all currencies and, I personally
believe, the increase in US interest rates has already been discounted.
I think the announcement, which I expect on Wednesday, is going to come
with a statement that the next increase is going to be very nominal. But
there appears to be some anxiousness in the US credit markets. Believe me,
this can be really disastrous. So let us look at that angle very carefully. Apart
from that, there is no way the Indian market can go down, it is going to go
This year we have got hit because of global flows, but shall we break out
I do not look at India along with other emerging markets. I look at India as an
independent country.The link will be broken ultimately...because the flow of
foreign money into Indian markets will be far less than the flow of local
money. This is a synchronisation, because foreign money is very important to
a lot of markets.
Among all emerging markets, India has the best macros and is poised to have
the highest growth rate in the world. So, I see no reason why India will not
break out of the pack.
The pain point clearly has been earnings recovery. Where do you think the
market went wrong?
Well, there has been good earnings growth in auto, pharma and
software.The economy is taking more time to pick up than was normally
anticipated.Also, we have had two below-par monsoons. We can look
forward to a good monsoon and also two-three things from the government
such as the focus on defence, railways, roads and ease of doing business.
These will see the actual effect as the actual orders are going to be there. I
have one prediction that India will be a big export hub in 10 years.
Domestic institutions are buying midcaps. Largecaps are not doing anything
and the midcaps are where the party is on.
Well, I do not see some great midcaps.The largecaps will ultimately give you
better percentage returns, may be with less excitement. It is not that
domestic investors are not buying largecaps. I think I would be careful in
buying some of the smallcaps, because the market is extrapolating one
quarter into many years and there is a lot of excitement in the midcaps. Be
So do you think somewhere the market is underestimating the problem with
It depends. In certain private banks, such as HDFC Bank and Kotak, they do
not have any problem, others I do not know. I am competent to say good or
bad, and I do not think HDFC Bank and Kotak will have problems.
How do you read the trend in the pharma space? A lot of good news
and a lot bad news have arrived together.
I am very optimistic on my pharma investments, in particular, and the
pharma industry in general. India is going to be a very big pharma
player because we have a large home market. We are getting the
technology. We are getting size. We are very price competitive. Indian
companies will spend $64 million on research. As far as my investments
are concerned, Lupin and Aurobindo, Lupin has had such a big rise and
Aurobindo is doing extremely well.
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