Don't see Nifty below 16,500, 'extremely bullish' on PSU banks, says Rakesh Jhunjhunwala

Ace investor Rakesh Jhunjhunwala is bullish on public sector banks and the market on the whole, unperturbed by the recent correction though valuations remain a concern.

"I do not see the Nifty going below the 16,500 mark. Market will be higher from here (until) next year," said Jhunjhunwala in an interview to CNBC-TV18 on November 1.

The comments came on the day the Nifty, which recently corrected more than 5 percent from record highs, snapped a three-day losing streak to rise 1.5 percent to close at 17,929.65.

Concerns are mounting about global economic recovery as fuel, food and commodity prices rise amid supply constraints. Jhunjhunwala, however, said, "Inflation worries are temporary and this is not runaway inflation". Chinese supply chain getting disrupted was causing inflation, he said.

Electric Vehicles

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Jhunjhunwala sees electric vehicles, which he said were a cheaper mode of transport, as inevitable. "As volume grows, cost of electric vehicles is coming down," he said.

Efforts are on across the globe and in India to push for EVs to lower pollution. In India, the government has come up with a string of incentives to take these vehicles mainstream to lower the fuel bill. India meets 80-85 percent of its fuel need through imports.

"Environment is a concern, not a choice for the government," Jhujhunwala said.

The tech IPO rush

Talking about the internet companies joining the IPO rush, he said the "strike rate" of tech firms would be low.  There have been concerns about the performance of some of these firms, which continue to be loss-making, irrespective of their valuations.

Will he invest in the IPOs of the tech companies? “I have no interest…. I would not like to comment on individual companies, but by sheer valuations, I don't have any interest in this, but I love and respect the dedication, the speed with which the new-age companies are working,” Jhunjhunwala said.

Jhunjhunwala-backed mobile gaming company Nazara Technologies raised Rs 583 crore through its IPO in March 2021.

He doesn’t see fintech companies posing a threat to banks. "What is it that you cannot do in HDFC (bank) that you can do in any fintech? Why can’t the other banks also become the collection agents; just remember one thing, the biggest source of finance and the biggest oil in the furnace of the finance industry is deposits," he said.

Valuation and strategy

Talking about his investment strategy, Jhujhunwala said he sells when prices are exorbitant and when valuations are higher than expected.

Last week, global brokerage house Morgan Stanley downgraded Indian equities to equal-weight from overweight due to expensive valuations. Nomura, too, downgraded Indian equities to neutral from overweight.

The downgrades were one of the primary reasons for the sharp selloff in the previous week.

On sectors, Jhunjunwala said, "I am extremely, extremely bullish on public sector undertaking (PSU) banks and on other industry also, I will go scrip-wise. Somewhere the valuations are ridiculous even today, we have companies valuing at 2-3 times EBITDA– that cannot be the valuations."

The realty sector was in the early stages of a long upcycle and the growth in aviation would surprise everyone, he added.

Jhunjhunwala-backed Akasa Air, a low-cost airline, is expected to launch operations in the summer of 2022. He is expected to own nearly 40 percent stake in the carrier.