Rakesh Jhunjhunwala says market peak far away; sees Nifty doubling in 4-5 years

Congratulating PM Modi-led government on completing three years, Jhunjhunwala said that he (Modi) is preparing India for a big change. “The effect of his policies will take time, but I don’t think it is 2-3 years away and (only) then we would see explosive 10-11 percent growth,” he added.

PM Modi has transferred a lot of money into the states. He is increasing spending and is still able to maintain fiscal discipline, he said. “I don’t think Indian economy has ever seen such a sunny time where you have stable interest rates, and good currency value. We are on the threshold of major growth and the NPA problem is likely to be resolved in next 12-24 months,” said Jhunjhunwala.

The S&P BSE Sensex rose over 27 percent while the Nifty rallied over 30 percent in the last three years. However, investors made money in the broader market as both S&P BSE Midcap and Smallcap indices nearly doubled in the same period thanks to global and local liquidity.

The big bull is of the view that the flow of money from Indian households has just started, thanks to demonetisation. “Tsunami of local money will come into the local market. Morgan Stanley is predicting that USD 425-825 billion in the next 10 years to flow into markets,” said Jhunjhunwala.

Below is the verbatim transcript of Rakesh Jhunjhunwala's interview to Shereen Bhan.

Q: Let me start by asking you, if you were to write a headline for the market today, what would it be?

A: Market, any runner has to take rest. So, the market, in the speed at which it was running, it had to take rest somewhere at some point. However, they say that bull markets corrections are severe and short-lived - sharp, severe, and short-lived.

Q: Do you believe we are going to see a sharp correction?

A: It is just the first race which we have to predict. We had a rise from 7,800 to 9,400-9,500. So, even if market were to correct a little, I think it will become healthier. It is difficult to predict whether -- if you see two-three days of continuous fall with good volume, then we could say market would go into a correction.

Q: I was not asking you for a headline for today's market movement. I was asking you for a headline for what we have actually seen happen over the past few months as far as our market is concerned. If you look at the numbers, Sensex up 26 percent, Nifty up 32 percent, midcap index up 95 percent.

A: But I will only say one thing that we should not count the good things of life – a woman's age, a man's wealth or the number of drinks. But one thing I can only say that happy days are here again and we should welcome them.

Q: So, let me get the headline out of the way as far as, you said we should not count things, but the market is probably waiting to hear from you. The debate is on, close to the peak, have we already peaked, valuations, so on and so forth. Where do you see things from here on?

A: When people talk of peaks, that is the time when peak is not near and the bull market, it is too short a time period for the bull market to have finished. For bull markets or for a stock to correct, you need three things. First, you need tremendous valuation froth.

Q: And you do not believe we are in that territory?

A: We are not in that stage at all -- maybe selectively but not in that stage at all. Second, you need commitment froth. Everybody in the market should be committed and leveraged, most players. And third then, you need bad news.

So what happens, when you have valuation froth and then you get bad news and everybody is committed, when the market falls, the leveraged buyer has no choice but to sell and because there is a lot of valuation froth and everybody is committed and there is bad news, it is very difficult to find a buyer. So, the bull market will really eclipse when all these three factors are present substantially – valuation froth, commitment froth, that means there is a lot of leveraged buying or even in investing, people are completely committed and third thing is bad news. So then on bad news when people sell, you do not find a buyer. But there may be valuation froth but there is no commitment froth, there is bad news, people sell but you find buyers. So, we are far, far away from that.

Q: That is very emphatically put. I cannot remember the number of fars that you added there, but we are far, far away from that scenario.

A: But I also want to add that it is not that we are having this bull market as a function of just commitment. What has happened is I think India is too – like three years of the government has passed – to change anything in India is very difficult, India is an elephant. But the kind of change which Mr Modi is bringing and because it is going to take time, I have always predicted that India is going to grow double digit and I have been predicting and I also predicted that a tsunami of local money will come into the markets.

Now, to change India, you need a lot of time. Even when Mr Modi became the Gujarat Chief Minister, he took the first term to basically understand everything and prepare for change. He is doing similarly in this Prime Ministership. And, his attitude, you know how I will compare his attitude to other politicians? That suppose you want to put water through a pipe, the pipe is leaking, it is rusty, but the politician will say put more water. So, Mr Modi is trying to put more water, but his bigger priority is to see that the rustiness goes away, the leakages are blocked. So, to do that takes time, so the effect of what he is doing is going to take time. But I do not see it is more than 2-3 years away and then you are going to have that explosive 10-11 percent growth. Remember one thing that he has transferred so much money into the states, he is increasing spending and still he is maintaining fiscal responsibility.

I do not think the Indian economy has ever seen such a sunny time where you have stable interest rates, good currency value; you are on treshold of major growth. I think the non-performing asset (NPA) problem now also will be resolved in the next 12-24 months.

Q: Since you spoke about the NPA problem, let me start by talking to you about that specific issue. We have seen this decision that has been taken by the government. We are still awaiting more clarity on the fine print from the RBI on how this is actually going to work. But, has this changed your view on public sector banks? We have seen a significant rally and how do you see this playing out? The jury is still out on how soon we will actually see this play out.

A: The problem is that there is cancer, it is known. Now you are afraid to treat or have an operation for the cancer because what will happen, first of all, the banks were not admitting the NPAs, so Mr Raghuram Rajan made them admit it.

Q: So, there has been NPA recognition, yes.

A: Second is, you have to resolve the matter. Suppose there is a loan of Rs 45,000 crore, now Rs 30,000 crore is good, but still the entire amount may not be provided for and you cannot get ahead in life. There have been even more severe financial crises in the world, in Sweden, in America, but those crises have been solved if the economy has been on an upswing. The Indian economy is on an upswing.

So, the question is what the RBI could do is, it is still in the framing stage, it will force the banks to recognise the NPAs and provide for it. That is not going to solve the problem for public sector banks in my opinion because they should need capital to provide for it. That has to be found. Second, at Pedder Road, 14 banks will be there of a common owner which is the government of India so their cost-income ratios do not go down. So, how do you work on their efficiency? And third is there is a big shyness to lend after the experience. So, that shyness has to go away. So at least for the banks that have adequate capital, the cancer will be operated upon and the result will be known and I think the results will be good. So, banks that are well run, who are efficient, for them it is the last 18 months of difficulties.

Q: So, you think the pain at least for the likes of State Bank of India (SBI), etc.

A: I do not want to take any names. But for banks which are efficiently run, which have got adequate capital, will be out of the woods in the next 12-18 months.

Q: So does this make you more confident about the state as far as the Indian banking sector is concerned?

A: Absolutely. Another thing that is going to happen is, most of the bank NPAs are arising out of lending taken place between 2009 and 2013. Now, those NPAs will be recognised. Post 2013-2014, banks have been very careful in giving money. So, I do not anticipate much NPAs once the legacy NPAs are solved. So, after that the banks -- if the credit cost goes down, they will perform well. Then I also see an upswing in credit growth.

Q: So, let me ask you about how all of this translates into earnings growth and do you believe that we are now going to see a significant pick up as far as earnings are concerned?

A: I do not look at earnings on a broad basis. There are sectors. Private sector banks are doing well, non-banking finance companies (NBFC) are doing well, metals are doing well. It is only pharmaceuticals and software which is a good constituent of the Nifty which is not doing well. Pharmaceutical I thing has made or is near a bottom and software, growth rates in the future, according to me, are going to be better than what the markets are predicting, maybe not this year, the years ahead.

Q: So, you are confident about the tech sector?

A: I will not say this year would necessarily be very good, but I surely think that with a period of time, these growth rates will improve.

Q: But, what are you basing your confidence on because if you look at a commentary that is coming in, whether it is on the visa related issues or generally as far as the environment, which is perhaps overblown.

A: I am basing my confidence basically on one thing that I do not agree, I think software spending is set go up in the world. Now, the model has changed and I am confident on the Indian companies' abilities to change to the model. They may take time, there may be less work in maintenance but more work in digital. So, with time, the Indian companies will respond and the Indian cost and ability, I do not say only cost, cost and ability advantage is unmatched. So, there is no question Indian companies are going to take the market. So, I see no reason why tech will not come back.

Q: So, you see a revival for the tech sector?

A: Yes, but I am not recommending to buy anything.

Q: I made that disclaimer right at the start, no recommendations here, it is just a conversation.

A: I feel that the Indian companies have changed their business and I feel that Indian companies are doing far greater growth, far greater and better quality work than just linear work. So, there is under appreciation of the quality of work that Indian companies are doing. And I see with their cost advantage and their ability advantage, and I use the work ability, I see no reason why they will not adjust to the new models. It is taking time and that is all.

Q: You said pharmaceutical also perhaps at the bottom at this point in time. What gives you the confidence that we are going to see a revival there?

A: There are three factors why the bearishness. One is the genericization which Government of India is claiming which I think is a night-keeper's dream. You can do genericization if you have a control on the quality of the manufacturer.

Q: So, you do not agree with the move towards to moving to generics?

A: It is impractical. I do not say agree or disagree, I say it is impractical; it is un-implementable because you do not know the quality of who is making where, what.

Q: What about greater price control?

A: Greater price control, they are having price control --50 percent of the materials are already under price control. Second thing is the problem of erosion and enhanced competition and consolidation in America. That is coming to a climax. And third is your rupee. I personally feel rupee will also go back to 66-67 per dollar levels. So, I do not say they have bottomed. They might have bottomed, but they might be in the process and I can be wrong.

Q: But, what about the Food and Drug Administration (FDA) related issues that most Indian companies seem to be burdened by?

A: I think it will be a legacy issue because more than a technical issue, it was a cultural issue. But now Indian companies have realised that you have got to be very careful.

Q: So, you are keeping the faith in pharmaceuticals?

A: I am keeping the faith. I think it is going to be one of India's very large industries. It is a skilled based industry and you cannot get chemists and this ability anywhere easily. I have an investment in a company -- what Pfizer makes at 100, Mylan makes at 75. What Mylan makes at 75, Lupin makes at 60. What Lupin makes at 60 that company makes at 40. You can hire a B-Pharm at Rs 30,000 a month. Look at the cost differences.

And I always have and will have faith in Indian entrepreneurs that they will be able to capture markets. People forget that Sony started by assembling transistors. So, if there is a learning curve and now India companies have huge USD 250,000 million of research budget. But that was only possible when the profits went up. There may be consolidation, all companies may not do well, but in general, pharmaceuticals will do well.

Q: One of the other sectors, in fact, we had Warren Buffett on CNBC for about three-four hours actually, last week talking about the sectors that he believes in and has faith in, he said airlines and the aviation business is no longer a suicidal business. You have kept the faith in Indian aviation as well, Interglobe Aviation (IndiGo) and SpiceJet. How confident do you continue to feel?

A: I do not want to talk about my positions, but I am bullish. Let us talk of IndiGo. 84 percent return on capital, 92 percent payout, still Rs 9,000 crore cash, industry growing at 20 percent a year. So, I do not know. A company which is constantly return on capital is over 60-70 percent and you have a cash to marketcap ratio, this is 7 percent, less-less 3 percent. So, I do not see any reason why there should be bearishness in airlines stocks, not that I am recommending you buy.

Q: I heard you ask Aditya Ghosh on the IndiGo conference call about aviation turbine fuel (ATF) prices. There is not much that he can actually do as far as ATF prices are concerned. That is something that the government has to work on.

A: I felt very disappointed with the call because at least he must keep a table ready. He knows what the constituents of ATF prices are. He must know that at this dollar rate and this international aviation fuel rate, this should be the price in India. That is what I asked him. And then I asked him, how is your price realisations. He said we do not talk about the future. I said tell us for April and he says we do not. This is the past. You are on a conference call; he does not know what his realisations are. Then tell me about industry, he says no, I do not know. Odd!

Q: I have been listening to you on the conference calls. I heard you on the Titan Company's conference call, I heard you the previous quarter on the Tata Motors conference call, this quarter on IndiGo. Is there some degree of impatience that is creeping in?

A: In me? Not at all. I am asking a very legitimate question. I am not asking them anything which is confidential and I am asking them publically.

Q: But do you believe that there needs to be greater effort in being more upfront in communications? That is one of the issues that you were raising, for instance, with the Tata Motors management on the foreign exchange (Forex) strategy.

A: It is too complicated and it is difficult to understand the strategy. So I was just asking them that if you tell us, and after that, they did reveal how much they have hedged. I think agreed later and they revealed, not to me, but to analysts.

Q: So, what is the bull case as far as the aviation sector is concerned? Double digit growth that we have seen for the sector, your faith has been reaffirmed by the performance at least – I am not asking you about the stocks, but for the sector?

A: I feel if this growth of 20 percent continues and there is limited capacity addition, then pricing will be better and I do not see oil prices going up any time soon.

Q: You talked about steel and we had Deepak Parekh of HDFC and Koushik Chatterjee of Tata Steel on the channel and Mr Parekh's bet was that over the next five years, he believes the affordable housing scheme is going to be the big multiplier. Koushik Chatterjee, Seshagiri Rao of JSW Steel, also seem to say very clearly that they believe the steel demand is going to be very robust going forward. Are you feeling as confident?

A: Steel demand being robust is no reason for robustness in steel shares because you can always import steel. So, there has to be parity with international price despite the antidumping. So, what is more important is the cost structure of each manufacturer. Steel can be imported freely. It is like cement. So, demand going up on steel is not going to affect the balance sheets of a lot of Indian companies. India is exporting a lot of steel.

I just read in JSW that they exported a lot of steel. So, I do not feel that robustness in housing demand in India is a big reason for bullishness in steel.

Q: But in general, do you feel confident about the steel sector, about metals?

A: It depends individually, company to company. It is a company to company matter.

Q: What will be the next big driver that you would watch out for? We have got the goods and services tax (GST), the GST Council is now in the process of finalising the GST rates. The sense one gets is that it is largely likely to be status quo. The effort will be to try and bring down rates, but do you see that as being a big driver? Is that going to be something that you will watch closely?

A: I do not think that tinkering of 1-2 percent of rates is really going to make a big difference. Suppose in certain industries where the rate is 24 percent, you bring it to 18 percent, it could stimulate demand to a certain level. But I do not think that the divergence in the rates will be so much that there can be a big demand.

Q: So, you do not see GST as a big game-changer?

A: No, but GST will be a big game-changer otherwise because I think, in logistics, cost of logistics, most companies will save 1 percent at least on logistics cost of the total cost. There is the big game-changer. Second, I think it will be very difficult to evade GST.

Q: So, compliance?

A: Compliance, which will raise tax revenues. And third thing is it will make the economy more and more digital because every return is going to be digital and that will help in the overall cleanliness in the economy. I am very bullish on GST. I think it is going to raise, in my opinion, predictions are from 1 percent to 8 percent – I think it could raise gross domestic product (GDP) by 2-2.5 percent over a period of time.

Q: But disruption in at least the first year?

A: I do not think first year, maybe first quarter because it was just like demonetisation. My opinion was how it affects the common man, he is going to consume. He is going to buy a house; he is going to buy a motorcycle and that is what happens. So, just because GST has come, you are not going to use soap? You are not going to buy a watch? You are not going to buy medicine?

So, I do not think that the divergence in rates can be demand stimulator but it will bring cleanliness to the economy, more tax collection, more procedural organisational, better systems in businesses.

Q: One of the other game-changers that could have a significant impact is the flow of domestic money into the market. Over the past two years, we have seen about USD 25 billion coming into the Indian markets via the domestic route. How confident do you feel about this scaling significantly forward?

A: I am shouting from 2001-2002. I said, okay foreigners, but there is going to be a tsunami of Indian money. There has to be. Morgan Stanley has reported that the local money in whatever form whether mutual funds, insurance or provident funds or individuals was about USD 60 billion in the last 10 years. They are predicting between USD 425 billion and USD 825 billion in the next 10 years. And I think they are going to be right.

Q: USD 425-825 billion over the next 10 years.

A: As against USD 60 billion. So, I think there will be a tsunami of money and I think there the demonetisation has played a big role because a lot of the money was lying into cupboards, has come into the banks. So, people either invest it or they consume it or they leave it in the bank. So, that has brought a lot of money into the formal economy.

Q: Speaking of formalisation and the formal economy, we are starting to see that happen for the real estate sector as well. We have seen the Real Estate Regulatory Authority (RERA) bill being passed and now being operationalised. How confident do you feel about a revival and a long-term change in the real estate sector?

A: I will draw an analogy between the stock market before 1994 and after 1994, the way they changed; I think the real estate sector will change that way. It is impossible today to adjust any profits in the stock market. Before 1994, that is what everybody did. So, it is a very good thing. Any change requires adjustment and loss to certain people. But overall, it is a very correct law and given 3-5 years, it will inspire confidence for investment in real estate because people will be bound by what they commit.

Q: So, it will still take another 3-5 years before you actually see a revival and a pick up as far as the sector is concerned?

A: And, also I see a lot of consolidation and real estate developers will need far more capital than they needed earlier, but there will be much cleaner practices.

Q: So, continue to reaffirm your faith in the real estate sector as well or feel even more confident now about it?

A: I am bullish on the real estate sector because I think the way the commercial sector peaked, I was planning to buy a rented premise in Bandra-Kurla Complex and I was fighting. I wanted a 12 percent cap, he was offering 11 percent cap and I left the deal. He came to 11.5 percent and today, those caps are 7.5 percent. So, prices have gone up 25-40 percent in the last two years. Same way, the residential market, at the economy level, Rs 30-40 lakh has already revived. Beyond that, that revival is here, it is not there.

Q: Since we are talking about themes, let me pick on the theme that you just touched upon. You talked about consolidation within the real estate sector; you talked about possible consolidation within the banking sector which is something that the government is hoping to push forward at least as far as the public sector banks (PSB) are concerned. Is consolidation going to be a big theme, agnostic, for India over the next 3-4 years?

A: It is going to be a big thing. It requires change of people's mindset and it will take time, but government is going to push through public sector consolidation but, Mr Chidambaram tried it nine years ago. It is not an easy thing.

Q: So you are not holding your breath on public sector banks being consolidated?

A: It is not an easy thing to do. I think it will happen post 2019.

Q: Post 2019? So similar scepticism then, we have heard so much about this business of strategic investment and lists being drawn up and so on and so forth, targets have been given. In fact Mr Panagariya, every time he does an interview with me, he says I hope it is going to happen in the next quarter, but he himself admitted that he is frustrated with the pace at which things have moved. So do you feel confident that at least maybe on the strategic disinvestment route we are going to see forward movement?

A: I told you that this term, Mr Modi is going to understand everything, plan everything and not necessarily do everything. What he has done will come to fruition, I mean the direct benefit transfer (DBT), there is right investment in roads, in power, the ease of doing business, but the big ticket, strategic disinvestments, they could be, I mean I do not know, I do not have a crystal ball to say, but it will be very actively opposed by the unions, labour law change.

So, if he elected with a good majority, the second term will be a Blitz Krieg.

Q: So, post 2019, if this government were to return to power, you believe that it is going to be.

A: Absolutely and within a year or two, you will see 10 percent levels according to me because all the infrastructure investments that we are making, the kind of roads we are making in villages. The first thing to take a village out of darkness is connectivity. The Aadhaar, nowhere in the world it has happened, this digitisation, acceptance of paying tax. It is all points in a circle. The circle can be complete.

I always believe India will have double digit growth and there will be a tsunami of local money. That is why I have kept all my wealth in equities. I believe the day is not far away. The Pandit will say, 'kanya ko lao, samay aa gaya hai'. So, I am very bullish, but as all humans what we do is we overestimate the immediate and underestimate the future. So, we may have got too bullish because we were very excited.

Q: Too bullish, too ahead you think?

A: In sectors, let us take housing. Now, because someone says housing, housing finance will boom, steel will boom, cement will boom, tiles will boom, everything will boom. Of course they are booming, but that pace of that boom will accentuate only after sometime.

Q: So, where do you believe that we are perhaps ahead in terms of exuberance? Which are the sectors that you believe are ahead in terms of exuberance?

A: No, I will not comment anything on that.

Q: Not stocks, but sectors?

A: No, no sectors. Enough of sectors now.

Q: Let me then ask you, you were talking about the infrastructure story and this has largely been driven by government spending whether it is the previous Budget or this year's Budget, the government continues to spend across roads, railways, etc. Private investment is yet to pick up. Do you see signs of that now?

A: Private investment in India with these kind of interest rates, how will private investment come in infrastructure? Be realistic. Today, there is excess of power plants. Who is going to build a road if there is no return on equity? There is so much competition. All those who bought the tolls are not doing well. So, you require long-term money Canadian Pension Fund, the government money. Who is going to invest with the railways? I do not think anybody is going to invest.

Q: So the infrastructure story from a private investment point of view, you think that it continues to have no takers?

A: No, the private investment can come in steel, it can come in cement, it can come in so many areas. It can come in cars, it can come in tractors, it can come in so many capital goods. So that does not mean, but the primary spending of infrastructure money will be driven by the government and the pension funds because the pension fund can look at an 8 percent return over a 30 year period. A private investor will not.

But the effects of the infrastructure is going to be tremendous. One of the biggest problem in India is electricity distribution. Today, we have power plants, but there is nobody to sign a power purchase agreement (PPA) because the electricity companies cannot pay the distribution companies. So unless we do all over what Mr Modi has done in Gujarat, it will be very difficult to have power for everybody. You may have the power, but there will be nobody to buy it.

All these problems are getting adjusted. They will take time. In Uttar Pradesh, the administration, law and order position, the cleanliness in administration, whatever Mr Adityanath is, he is a decision man, he is a clean man. He is going to clean up UP in my opinion.

Q: You are confident about that?

A: 101 percent.

Q: On what basis?

A: On his track record.

Q: But he has not been an administrator.

A: This is my judgement. In the stock market you do not wait for the event to happen, you predict it and I can always be wrong. I think he will be a clean, good administrator. And people's face change when they come into power for the good. When you are on the road, you can say anything, shout anything. When you are in power, you cannot.

Q: Post 2019 if this government were to return to power we will see s blitzkrieg of reform action. Even over the next few days we are expecting more decisions on further liberalisation as far as FDI is concerned, food retail and so on and so forth but that is incremental stuff over the decisions that have already been taken which are pretty significant decisions on the FDI front. If I were to ask you about 2 or 3 big ticket ideas that you believe the government should now focus on, that could have a lasting and a multiplier impact on the economy, what would it be?

A: One was GST and second labour laws. I think labour laws are all antiquated labour laws. America has got the freest labour laws. If Rajasthan does it and Rajasthan attracts investment then Gujarat will be forced to do it.

I think the land acquisition law needs a easier law. We need strategic disinvestment of the public sector. We need consolidation within government. I think government has to withdraw from certain businesses.  We need to attract more investment into oil exploration, into every area. So, what I call second generation reforms, GST is one of them, they will play out over the next 2-3 years.

I say post 2019 there will be blitzkrieg doesn't mean that nothing is going to happen over the next two years.

We are living in an economy in which 70000 are born to eat every day. Demand is always there if affordability and supply is there. We have had a cyclical slowdown for four years. So, as period comes, every year the growth is going to increase.

Q: The last conversation that you had with us, you said that India is in a similar position that we were in 2002-2003 and we are on the cusp of a major turnaround. Do you believe that, that period starts now?

A: Yes, I would say so because in 2002-2003 the savings rate was 30 percent, the investment in the economy was around 30 whereas the investment rate went up to as high as 38 percent. The savings rate went up to as high as 37 percent in 2007-2008.

Now we have real interest rates, so people would want to save in financial assets and then path is upwards. Again when we reach at 38-37 percent both ways then we could have some sight of a climax in growth.

In consumption India has done very well. Exports are now starting to pick up. What we need is a kicker in investment.

Q: What will provide that kicker to investment?

A: Demand and ease of doing business.

Q: You believe that ease of doing business at least on the feedback that you get, things haven't changed as much?

A: They have changed but that has to be coupled with demand. If there is ease of doing business but no demand for cars, Maruti is not going to put up a new plant.

I am not a economist, I don't predict too much. I judge on broad ideas. I have based my investment in equity all my life only on these two facts, that India is going to grow and tsunami of money will come to the stock market because when the economy grows, markets will grow, and tax free, ease of ease of doing business and good regulation, so why will it not come.

Q: You are talking about taxes and we continue to hear despite all the other noises that we hear from the US, even yesterday President Trump saying that we are going announce the biggest corporate tax cut in US history. We are still awaiting the details of that. India of course has promised to bring corporate taxes down to 25 percent. We have done it for certain category of companies. But we haven't done it for the big corporations so to speak. Do, you believe that this is going to be certain that must be aggressively now pursued?

A: It can be done in a day if we remove the deductions. I think we will eventually achieve it.

Q: Are you watching what is happening in the US closely?

A: Donald Trump proposes but he doesn't get the acceptance. He is going to be a lame duck President according to me. He is going to be able to do nothing according to me, I can be wrong.

Q: You believe he is not going to be able to do any of the stuff that he has said that he wants to do?

A: Yes, I don't think so. He doesn't know how to deal with Capitol Hill. He still thinks government is like business, you can tell anything and to anybody. There is a very big dissention against him.

Q: Just from flows perspective, what is that then going to mean as far as emerging markets and especially markets like India are concerned?

A: World markets could correct. This could be the reason. You can't time the markets to perfection. Correction or rise it is only shown by price. Every day you dig, nothing happens in a day. So, markets can always correct, there is no question about it.

Q: You said you have great faith in the entrepreneurship of Indians. Let me ask you specifically using one example because you are invested in a lot of Tata Group companies. I know that you spoke out quite vociferously when the Mistry battle started and you came out in support of the Tata Group. Now that N Chandrasekaran is at helm of affairs, what do you believe for a large conglomerate like the Tata's, what would you like to see in terms of new strategy?

A: I am too small a man to talk and teach Tata's.

Q: You track a lot of those companies, you are invested in lot of those companies?

A: N Chandrasekaran is a very capable man and a very humble man. Let us comment on the strategy after he comes out.

Q: I am saying what would you like to see?

A: More integration. That is really a broad question, I am not really competent to answer.

Q: What would worry you today - domestic factors, global factors?

A: Only one factor worries me which is Pakistan's nuclear bomb. In India according to me things can be delayed, they cannot be denied. Maybe my portfolio could go down for a year and then it will make up in the next year or the year after that, it doesn't make a difference. However something which can permanently damage the country is Pakistan's nuclear bomb and they are in the hands of a near terrorist state or a failed state, it's a dangerous thing.

Q: So, Pakistan and geopolitical stability, a big risk factor that you would watch out for. But outside of that and I go back to the Buffett interview. He said I do not invest looking at the GDP print, I do not invest looking at who is in the Whitehouse. What is driving your investments today?

A: My country. India is going to grow because of what India is. I know India's chemistries. Even if Mr Modi was not to come, growth would come, maybe at a slower pace. So I have no doubt about India's growth and bullishness. Maybe it is lesser than what it could be, but then we might have to go to a dictorial mode which is not desirable according to me. So, I have complete confidence. India has raised its GDP level of growth and every decade since independence. Socialism, sovietism, Nehru, Shastriji, anybody. So, India grows because of India. All factors only change for instance.

So, I have complete confidence and that confidence cannot be shaken. It has gone through a lot of bear phases, it has not shaken in 30-32 years, I do not think it will shake now.

Q: What was the number? I forget the number that you had given me in terms of where you see the Nifty over the next 10 years. It was a massive number and I had looked at you I disbelief. Where do you see the Nifty in the next 10 years given where things stand currently and how bullish you are?

A: It should compound at 15 percent per year. So, it can double in four years, I think, if we have the economic growth that I feel we can have.

Q: So, given the fact that you believe that the kind of economic growth that we are sitting on is only going to improve from here on.

A: I think it is going to be double digit and ours is going to be far stronger and far more stable than China, but ours will not be based only on investment. It will be based also on consumption. So, India is going to grow. See, the way is upward. I look at it this way.

Q: So whether it is four years or not, the Nifty is going to double? Whether it is four or five years, the Nifty is going to double?

A: The Nifty is going to be one lakh, one day. I do not know when.

Q: That is the number that you had given me.

A: The question is not whether it will be one lakh. The question is when and I look at it this way that I am a lazy character. I do not like to work or be responsible for anything operational. My debt will give me a 7-8 percent return, 6 percent post tax. Equity can give me 15-18 percent post tax which I have achieved always, much more than that. I am happy with that. So, it comes today, it comes in bulges or it does not come for a year, I am not worried.

Q: But given the fact that you are feeling this bullish, has the risk appetite resurfaced because the last chat we had, you said that now you are taking a little bit of a back seat when it comes to taking risks.

A: Because, if you had told me in December, 2013 that same Rahul Gandhi interview, what to buy? I said, do 'eena, meena, mina, mo', whatever comes buy. And most stocks have doubled during that time, doubled or even higher. But now market, it is not that valuation wise I can say, 'eena, meena, mina, mo', and buy. But I have all my wealth still in equity, it is going to remain in equity and I have supreme faith in India. And this economy of Indian money will lead to some kind of a madness, we do not know.

Q: Madness, usually, it tends to also have undercurrents of chaos, etc. We do not want to head into that territory.

A: It is not a question of whether you want to or not. You head to that territory.

Q: So, it will?

A: It will, but we should be in four years, five years, six years, whenever, we do not know. You do not want to have a mad phase? Every bar, every party, every girl, every boy is going to across the board, equity. That is the time, I have to decide one day, I am going to go into cash. So that will be that time.

Q: And you see that happening over the next few years?

A: Few means, surely in the next 5-8 years.

Q: But a more realistic target at least for the end of 2017 for the Nifty?

A: The path is upward, that much I can tell you. Whether it is going to be x or it is going to y, who knows?

Q: 10,000?

A: Who knows?