JHUNJHUNWALA SEES YEARS OF DOUBLE-DIGIT STOCK GAINS

Jhunjhunwala says new money will only fuel further rise in key indices

Annual equity returns from Indian stocks will be about 5 percentage points on top of the economic growth of 7-10 per cent in coming years, according to billionaire investor Rakesh Jhunjhunwala.

Known locally as the country’s Warren Buffett because of his penchant for equity investing, Jhunjhunwala is counting on the nation’s potential for long-term growth and political stability to fuel further gains in the $3 trillion stock market that’s already been hitting record after record this year.

His bets range from banks and health insurance — which he says will be boosted by the pandemic — to a broad consumer rally on the back of Prime Minister Narendra Modi’s policies to give every Indian a home and access to clean water.

“We are in the middle of a bull phase which will last for a very, very long time,” Jhunjhunwala said in an interview earlier this month. “India will also look lucrative when the US Federal Reserve (Fed) begins to withdraw stimulus, but there will be short-term disruptions.”

Long-time observers of Jhunjhunwala, also known as ‘Big Bull’ in India, wouldn’t be surprised by his forecasts. Jhunjhunwala’s comments come as local shares have continued to climb despite a deadly wave of the coronavirus that hurt the real economy, rendering people jobless and denting consumption.

“The Reserve Bank and others were worried even when the Nifty was at 8,000 points,” Jhunjhunwala said in a video interview on June 3, referring to one of the country’s key gauges that’s now heading toward an unprecedented 16,000 level after having almost doubled since the end of 2015.

Only two events would be significant enough to make him wary about India’s prospects, he said. Political instability — which he says is unlikely for now given his expectation that Modi will stay in power at least through 2029 — and any antagonism from India’s nuclear-armed archrival Pakistan.

The Nifty50 index has risen more than 12 per cent so far in 2021, outperforming the MSCI Asia Pacific Index by about 9 percentage points. The country’s gauge is trading at more than 20x its 12-month forward

“INDIAWILLALSOLOOK LUCRATIVE WHEN THE US FEDERAL RESERVE BEGINS TO WITHDRAW STIMULUS, BUT THERE WILL BE SHORT-TERM DISRUPTIONS”

RAKESH JHUNJHUNWALA Investor

earnings estimates, versus a five-year average multiple of 18, data compiled by Bloomberg show.

The Nifty gained as much as 0.6 per cent to 15,784 on Thursday, near an alltime high, while the Sensex climbed as much as 0.7 per cent to 52,658.4 as of 12.20 pm IST.

A record pace of gains, extreme breadth (95 per cent of stocks are above their 200day moving average) and penny-stock mania could point to a near-term pause in Indian equities, yet “we continue to be structurally positive for the long term,” Bloomberg Intelligence strategists Gaurav Patankar and Nitin Chanduka wrote in a report earlier this week.

New money

New money will only fuel further gains in key indexes, Jhunjhunwala said, with a large photo of the BSE, Asia’s oldest bourse, visible in the background. The Reserve Bank of India sees the region’s third-largest economy expanding 9.5 per cent in the year that began April 1.

A custom index of the billionaire investor’s top 20 stock holdings as of end-march has rallied about 85 per cent over the past year, according to exchange data on shareholdings compiled by Bloomberg. That’s versus a 50 per cent jump in the Nifty50 gauge during this period.

Jhunjhunwala has an estimated net worth of $4.6 billion, according to Forbes.

‘Complete faith’

Jhunjhunwala also invests through his firm Rare Enterprises that derives its title from the first two letters of his name and that of his wife, Rekha Jhunjhunwala. He declined to comment on individual investments citing local regulations and Rare’s own policies.

One of his early successes was CRISIL, which he first bought in 2002 at ~150 apiece. S&P Global offered ~775 a share in 2005 to gain control of the Indian firm. CRISIL is now at around ~2,882, and Jhunjhunwala, along with his wife, owned about 5.5 per cent as of March-end, data compiled by Bloomberg show.

Jhunjhunwala wasn’t always a bull. He said he made ~40 crore ($5.4 million) shorting stocks during the country’s first billion-dollar financial scandal, which erupted during the heady days of economic liberalisation in the early 1990s.

Back then, a broker, Harshad Mehta, had funneled money borrowed from banks into equities on the BSE, pushing up stock prices. When the $2 billion fraud was discovered, it caused a market crash. The Securities and Exchange Board of India was created in the aftermath of the scandal, and millions of millennials have since roared in as retail investors.

“I have complete faith in markets,” Jhunjhunwala said. “All my money is put into equities. I haven’t invested anywhere other than the equity MARKETS.”BLOOMBERG