Ramesh Damani spells out 3 Ds of Indian markets’ bull run; says best time to invest is ‘now’

There's a significant movement in ‘China plus one’ strategy too.

Demographics of an aspirational population, domestic consumption, and transformative impact of digitisation are the major forces fuelling Indian equity markets’ bull run, said veteran investor and BSE member Ramesh Damani.

In an interview to Moneycontrol on the sidelines of News18 Rising Bharat Summit, Damani expressed optimism about the long-term growth of the Indian markets, highlighting a historical compounding rate of 14-15 percent. He said that investors can expect significant returns, akin to the transformation seen in Japan from 1964 onwards. Edited excerpts of the interview:

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You said that India’s bull run is being fuelled by the domestic consumption story. Is the consumption strong all across, or is it strong at the premium end but weak at the lower end?

The markets are about looking into the future, and not at the past. While there was a K-shape recovery post-Covid, India’s demographics and digitisation that's taking place will act as huge levellers.

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Demographics are changing a lot of things. India is now the most populous nation. The growth and the prosperity will come from our people and our workforce out there. The second part is the impact of digitisation in India. People can now pay frictionless for something by digitisation, and get services that only the wealthy got, whether it's your demat accounts, broking accounts, regular interface, or the job profile that you have.

Read more: Rising Bharat Summit 2024: How India's bull case looks to top market investors

So we hope that the K-shape recovery becomes more inclusive and more prosperous over the next 5-10 years.

You talk about digitisation being a pillar of growth. Can you explain?

Digitisation creates a paradigm shift in terms of opportunities for all Indians. For example, thanks to digitisation, people will be able to do a lot more back office work which cannot be done in America. And, they'll be doing it in Banaras, or Coimbatore, or Lucknow, or other such places across India, which will of course create a huge multiplier effect. I think this revolution will not take place in the next three months or the next two quarters, but over the next 10-20 years.

That long-term equity markets will do well in India is a given. What could be the short-term pain points?

The people who have made money in India are the long term investors. When I started my career in the stock market prior to 1990, the index was below 1,000. Today it's 75,000. So it paid to be a long term investor in India. In that time, there have been various falls, the global financial crisis, governments have come and gone, Kargil (war). And yet, 30-35 years later, the index has compounded at 14-15 percent.

I think short-term, there's always risk, there's always volatility that goes on. There’s a winter squall. It’ll destroy a few things. But the people who really prosper are the people who buy good companies. The sheer power of compounding makes you rich in this business.

Markets are volatile right now. Would you advice investors to wait for better entry points?

It’s almost very difficult to say. But like I said, the best time to invest in India was in July 1991 before Manmohan Singh announced his economic liberalisation program. The next best time to do it is today. I don't feel it's too late to invest in India. Remember if your money doubles every three years, you're going to be enormously rich. The index itself will give you 16-17 percent, plus a couple of points for dividend. So a 5-10 percent correction doesn't mean anything if you are a long term investor. As I mentioned,  India is looking where Japan was in 1964. The index went from 1,000 to 40,000, and all the Japanese companies became global household names.

What was your reading on Q3 earnings?

I look at my own individual companies’ earnings, and they could have been better, but I think we are broadly on track and doing well. I had a lot of exposure to the public sector companies whose earnings trajectory has been very good. A lot of these private sector FMCG companies or banks haven't done that well because the earnings have disappointed.

For the companies or sectors that you hold, what kind of earnings are you looking forward to?

Generally, we have companies with 18-20 percent earnings out there. I have a very diversified basket of portfolios. I can't individually say which one is going to do well. Sometimes they come as a surprise to us also.

In terms of companies’ business performance in Q4, where do you see raw material pressures, and where do you see pricing power?

A lot of people speak about airlines; that is a business that finally has some pricing power, which the market has not recognised yet. Because increasingly we are paying almost double the fare than we paid a few years back. We have a la carte pricing for tickets, food, seats, priority boarding, and so on. I don't think oil prices will impact them anymore. There's a significant movement in ‘China plus one’ strategy too.