Rakesh Jhunjhunwala on February 23 said that Nifty50 could reach 90,000-1,00,000 levels by 2030. This means a 580 percent upside from current levels! The bold prediction by the big bull of Dalal Street is on the back of the changing landscape of the Indian economy.
This is not the first time Jhunjhunwala has given such an optimistic outlook. In 2014, he said the 50-share benchmark could topple 1,25,000 by 2030.
"India is going to surprise on the upside. Depth depends on several factors. India is on a roll and consequently, the stock market is on a roll. I think people are underestimating the kind of change that is taking place. India has inherent skills," he said in an interview with CNBC.
India's inherent skills
Jhunjhunwala said the corporate profits to GDP ratio is at the lowest ever.
"Exposure to equities in India, a country with savings of $550 billion is only 5 percent of the wealth. We have the least leverage corporate sector in history. And we have had the credit cycle problem, no-where in the world, the credit cycle problem occurred, it takes at least 10 years for the next one after the last one peaks," he said.
"Now, we have a rejuvenated and a resurgent India and the Budget is conveying much more on that. The government is going to do what it has to do in terms of policies and at the same time use the money for corporate disbursement and social justice, so I am extremely bullish on India," he added.
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The majority of experts have given a massive thumbs-up to the Budget FY22 announced by the Narendra Modi-led government. They believe it can take India to much much higher levels in terms of growth, albeit with proper implementation.
The optimism around the Budget led to a 9 percent week-on-week rally in the Indian market. Sensex touched 52,000 mark for the first time and Nifty claimed 15,000 levels in the days following the Budget.
Speaking on the mechanism of economic growth, Jhunjhunwala said: "The prolonged period of growth has either come from colonialism or skill and democracies. I think Indians are essentially skilled people, growth is a process, everything in India is bottoms up and not tops down, it is a democratic varied country."
"As time passes, things will get better. If we see the prosperities of non-resident Indians whether it is in Singapore, the United States or the United Kingdom, the NRIs platform has slowly been building up in India. Next year India is going to grow 10-11 percent and next 3-4 years India will grow 6-8-10 percent. I see double-digit growth for a prolonged period of time and that is my opinion, I reserved the right to call."
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He believes corporate profits is the function of growth and India has always had a higher return on equity (ROE). "We have huge underexposure to equities. We have created mediums, so that money could be invested in markets. We have very good corporate governance, we have a good mutual fund industry. So I see no reason why India should not grow continuously at a very high rate."
According to Jhunjhunwala, the only long-term risk for India is the conflict with Pakistan. As for the COVID-19 situation, he does not see a second wave in India
"I am sure that there is not going to be a second wave in India. The government and people are far more vigilant than they were earlier. 85 percent of cases are only in two states - Maharashtra and Karnataka. So I think it is all over except the shouting," he explained.
The government in its Budget lowered its divestment target for FY22 to Rs 1.75 lakh crore from over Rs 2.1 lakh crore of FY21 but promised to complete the divestment programme including that of two PSU banks and one general insurance company.
"Divestment framework is moving towards full privatisation and minimum government maximum governance policy. This (minimum government maximum governance) is the intent of the government and I see no reason why they will not do it," Jhunjhunwala said.
Announcing its version of the bad bank, the government in Budget decided to set up an Asset Reconstruction and Management Company to take over bad loans. A bad bank will act as an aggregator of all stressed assets in the system.
But, Jhunjhunwala sees no need for a bad bank. "There is no need for a bad bank now as the problem is fixed. Most banks are provided far more than they needed. The corporate sector has the lowest leverage. Most of the bad loans in the corporate sector have come on the questions of integrity and extreme risk. I think that is all over now."
Bitcoin and Cryptocurrency
Speaking on bitcoin, Jhunjhunwala said he would never invest in the cryptocurrency and opined that it should be banned.
"I won't buy Bitcoin even for $5. In the world, only the sovereign has the right to create currency. The dollar move of 1-2 percent is news but here the fluctuation is 10-15 percent in a day, hence the speculation is the highest. I don't want to join every party in the town. You should go to the party which you like. I will never buy Bitcoin in my life. Cryptocurrencies should be banned," he said.
The government has been working hard to create the infrastructure for electric vehicles. Even auto companies globally including Tesla, Volkswagen and JLR, are in the manufacturing of electric vehicles. Sharing his view on the same, Jhunjhunwala said: "The biggest and best player in electric cars in India is going to be Tata Motors. I am a shareholder and I am playing EV story with Tata Motors only."