Q: IT as well.

A: So the missing link in this whole thing is IT, which is our only real direct export link to the world. While it’s hard to be bullish on this sector as a big wealth creator, the fact is that there are three or four large companies which have run their businesses as well. They are part of a global chain and these 3-5 companies are the ones that will continue to enjoy sensible valuations. They may not be wealth creators but they aren't going to give you the massive jumps from an index leader perspective either. So, if we really have to go up significantly in some sense, you need a commodity bull market in India. Now, whether it happens because of oil and gas or because of metals is beside the point because this has a cascading effect on the entire chain and that’s what lifts the animal spirits as well.

Q: So you are saying for a serious bull market in India or an earnings-led bull market to start off, you will need to see a bull market in commodities again?

A: Inevitably, because it’s not like the 2000 scenario where the technology, media, and telecommunications sector just completely blew out and led earnings growth. When you get just narrow moves in 2-3 sectors anyway, you don't get large secular bull markets. If you get up cycles in commodities and they remain moderate and don't blow out like crude at USD 150 per barrel and so on, its actually good for the country in a sense because not just they make profits, they transmit it down to capital goods, banking.

Due to the commodity linkages, people who have pricing power like FMCGs end up increasing their prices as well. In nominal optical terms, it looks like a larger earnings number. Last year, when the commodity prices fell, we got excited that commodity prices are falling therefore input costs will go down. But if you don't have pricing power, which most people don't have, it actually leads to earnings deceleration. Unless you have massive volume growth to offset that, you optically don't get earnings growth over there. So, the market may trade at a higher P/E multiple saying that this is now more sustainable and so on and so forth, but you don't get into a bullish phase because of that.

Q: So USD 80 per barrel crude or USD 50 per tonne steel is good news for India you are saying?

Q: Let me ask you about a prospect for re-rating of this market; you spoke about the earnings picture - a bull market also means price-to-earnings move up from 14,000 to 20,000. When can we have an environment where PE multiples start moving up from where we have reached already which is at least a reasonably fair multiple if not a big multiple?

A: It’s a fair multiple. But for re-rating you need to see a stable interest rate environment and declining rates because there is lot of money available to you and that money becomes available because the longer-term picture looks very rosy to you and that rosy picture will start getting built only when you see earnings acceleration and then you see these earnings can actually extend into ‘x’ number of years into the future as well and if you make a case for infrastructure in India also and infrastructure, the biggest spot of gold is actually is in the power space - I am just disgracing a big. But if you look at the ports and airports, the GMR and the Mundra Port is probably USD 5 billion type market cap. On the power side because you are going to create 10,000-50,000 million mw, you will create USD 10-40 billion companies. Today our largest power company is NTPC with USD 33-35 billion. Given the history of what we have done in our country when we opened the telecom sector; we got Bharti become bigger than BSNL in terms of current market cap. It’s no unreasonable to expect same thing even happen over there. So if you have to get re-rated, people have to see large profit opportunities of the magnitude that you made in telecom or you made ten years ago in the IT space for people to get excited and say that trajectory of this country has changed and you can go into completely hyper bull market.

Q: Were you saying that Reliance Power will become bigger than NTPC in market cap in 10 years?

A: Honestly, who is going to execute and deliver 20-30-40,000 MW over the next 5-10 years, time will tell. But at least the people who are approaching this space in the right manner have a reasonable shot at making that kind of wealth creation over there and that is the single largest chunk of infrastructure in this country. Also, it is not unreasonable when you expect the amount of gas that is going to flow in and the amount of coal reserves that we sit on. It is very uncanny that why this country is suffering from a power deficit. If you take a 5-7 year view because a lot of these plants will take time to get built and juxtapose it with the fact that the state electricity boards are basically bankrupt because of all the free power that it has given away, the profit pool in this space is just extraordinary and serious money will get created here. Now, who executes, who is able to deliver projects on time, who is able to actually monetise, build a smart system by which they can make some money on the merchant power side even when they are selling on regulated rates, do they have enough linkages on the power grid, and do they have fewer linkages, only time will tell but the seeds of big profits are already in there.

Q: Whether you think we will see 10,000 Sensex before we see 21,000 Sensex?

A: Unlikely to see 10,000.

Q: Will we see 12,000 Sensex before we see 21,000 Sensex?

A: Cannot rule it out.

Q: Do you see 21,000 happening in the next one year - 12 months from here?

A: If you get currencies move in the world it’s possible.

Q: Means if the dollar tanks then it can happen?

A: Dollar and the Yuan there is major moves happening over there because that will lead to gush off money into this part of the world. In the next 12 months it’s quite likely that you do get that kind of a gush. But that may not be a sustainable number in the short-run which will mean lot of turmoil in the world which readjusts, we cleanup the system and then go back and make significantly higher tops. So I am not honestly focused on the 20,000 number.