On a day which marks the third anniversary of the announcement of BJP’s historic election victory, Porinju Veliyath, Equity Intelligence India, said that Indian equities are at the bottom and there are plenty of stocks which can give 5-10 bagger returns from current levels.
The S&P BSE Sensex rallied 269 points to hit a fresh record high of 30,591.55 while Nifty closed above its crucial resistance level of 9,500 for the first time ever on Tuesday. It hit a record high of 9,517.20 before closing the day at 9,512.25.
In an interview with CNBC-TV18, the ace investor, known for spotting small and midcap stocks at the right time and right price, said that Indian investors are staring at a golden opportunity of stocks picking which can continue for 3-5 years.
The kind of opportunities that are emerging especially in the mid and smallcap space and some of them gets transformed to the next levels which mean that many midcaps become largecap stocks.
“Indian equities are at the bottom and investors should focus on companies which are in turnaround mode. There are about 100 companies which are at turnaround mode where you can make 5x-10x money going forward,” said Porinju.
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Rebuffing concerns over stretched valuations as well as correction in markets after a decent run-up seen so far in the year 2017, Porinju said that market mentality is to sell because the market is trading at a record high. This is not the right approach because Indian equities are at the bottom.
The S&P BSE Sensex rallied 26 percent while the S&P Smallcap and midcap index nearly doubled in the last three years Modi government in office. Investors who were not scared to take some risk ended up making up to 6,000 percent return in the same period.
Reforms initiated by the government to boost economic activity, kick start investment cycle, double agricultural income, increase rural consumption, boost manufacturing, curb on the supply of black money and now goods & services tax (GST) all support bullish sentiment in markets.
The large part of the rally will be led by domestic companies or companies which are focussed on economic activity while export-oriented companies might take a back seat.
“Stocks focussed or linked to domestic economy are likely to do well. I don’t see Infosys or Sun Pharma creating huge wealth for investors. But, when there is excitement happening in the economy, investors should focus on 5-10 baggers,” said Porinju.
One big reason for such optimism is flows of domestic saving into equity markets. Porinju expects USD 100 billion of household saving to flow into Indian equity markets, although some market participants might doubt that figure.
“We have to understand that we are in the economy where the economy is moving from black to white, unorganised to organised --- this is historic and people are underestimating the potential of the structural change which is happening,” said Porinju.
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