After a euphoric rise seen in the calendar year 2017, the Indian market is not ready to go down that is the word coming from the big bull, Rakesh Jhunjhunwala on the sidelines of Trust India Debt Capital Market Summit which was held in Mumbai on Friday.
After the recent fall that was seen in India equity markets, Jhunjhunwala said that he is in a dilemma in which technically the market is not prepared to go down and you have the highest PE’s in the history at the lowest level of profits-to-GDP.
The question Jhunjhunwala put across to the panelist is ‘has the market priced itself for the increase in profit growth’? This is something which all of us has to mull.
Showing his confidence towards the equity markets, Jhunjhunwala said that he is not going to put his money anywhere else apart from equities.
But, at the same time, he cautions investors to have one eye on valuations and don’t get fooled or blinded by the extraordinary gains made in the portfolio in the year 2017. But, the question he put across was that if there a possibility of sub-moderate gains in the next 2-3 years.
Commenting on the investors’ psychology, Jhunjhunwala said that when you have a lot of gains made in 3-4 years. We get blinded by the momentum and we believe that gains are here to stay.
Markets right now are not technically able to go down but that could happen a year later.
Commenting on the valuations, Jhunjhunwala said all stocks which have PE of over 30x have 15-20% growth, had cash flows greater than operating profit and payout ratio of 30-40%.moneycontrol