Indian mkt on cusp of multi-year bull run: Ramesh Damani

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Market veteran Ramesh Damani has generally been bullish but was very sceptical and correctly so for throughout 2008. Is he still sceptical or has his view changed?

In an interview with CNBC-TV18's Udayan Mukherjee, Damani said the way the market bounced back from its lows showed the market was never in bear market terrain. "A bear market by definition cannot snap back on a V-shaped recovery, the fact that the market has snapped back suggests that we were in a very severe correction of a bull market," he said.

"This bull market in terms of how well it bounced back from lows is suggesting that there is something going on that is extraordinary in India. We are in the process of taking India from a trillion-dollar economy to not a 2-trillion dollar or a 3-trillion dollar economy but something far greater," Damani said. "Maybe in a generation, we will take a population from affliction to affluence, from poverty to prosperity, maybe we would go from 100 million people in the middle class right now to a billion people in the middle class and the profound investment implications for that over investment horizons."

Saying it was futile to try and call the market as to what would happen in the next quarter or year because there was many confusing short-term signals, Damani compared India to the America of the '50s: "You knew that the Korean War took place and the Vietnam War took place and the race riots took place and the index kept plodding higher over periods of time and if you bought the right companies at that time, you made an enormous amount of fortune by the time 2000 came around. So maybe we will see a lot of corrections during this way, riots in India, slippages and liquidity crisis but if you invest in the right kind of companies and the right kind of stocks, then probably there is a pot at the end of the rainbow that is waiting for investors."

Here is a verbatim transcript of Ramesh Damani's exclusive interview on CNBC-TV18. Also watch the accompanying video.

Q: Bull or bear?

A: There is an old saying that if the bird talks like a duck, walks like a duck and quacks like a duck, then it is a duck and I think all the readings that I see in the market sound bullish. I mean the market is climbing its proverbial wall of worry. You know the bear markets don't correct so much. The screen tells you a completely bullish story. There has been a gradual increase, people are being able to trade and the volumes take place, so I think the intellectual fit that I am trying to describe myself, it would be correct to say that I was very bearish when the markets were going down. Perhaps this was not a bull or a bear market. This was perhaps a very severe correction in an ongoing bull market that we experienced. It was maybe a 70% correction but a bear market by definition cannot snap back on a V-shaped recovery, the fact that the market has snapped back suggests that we were in a very severe correction of a bull market.

Q: At what point did you relook at your basic core hypothesis that we are in a bear market and this is just a bull market rally? When were you convinced first because we spoke about three-four months back and you were still quite hesitant to say that the bear market is over, what convinced you?

A: I think after the elections, the market made a 20% gap as you famously know and it has held that gap and that is almost impossible for a major market, a trillion dollar economy, a 17-18% gap to hold that and the market has held that for almost 100 days after that and you know the corporate results have come on and globally the market have recovered, maybe it is liquidity but it may be that India is putting a different story, maybe it is once in a generation thing that we are seeing and we are so unfamiliar with that kind of history. I will take you back to an example I quote frequently of the Japanese bull market, which extended the duration of 25 years and in 1987 when the global markets crashed across the world, the Japanese markets crashed too but it was one of the first to recover and continued to make new highs for a long time to come. So maybe in that kind of stage, in the evolution of the Indian economy as you go from a trillion dollar economy to a 20 trillion dollar economy over a period of 20 years and what we saw was a very sharp correction but the game is to stay invested in good stocks and perhaps the markets are telling us that.

Q: What are the odds that as the skeptics still point out that this is just the liquidity talking and very soon we will have a massive fall once again, so don't trust it?

A: I think invariably we are going to have a fall sometime soon. If you look at the US employment data that came out, 9.7% and if you look at the aggregate employment, people are looking for jobs and people are looking part time jobs, there are 25 million people in US who are unemployed, so there is no case to be extraordinary bullish but there is another saying that you cannot fight city haul, if the government wants to promote liquidity, it is going to do that and it has just been gushing around. In India there is appetite, growth and hunger for stocks and so we could have a setback during the way but I think that the worst of the prices is behind us now.

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