Welcome SAMVAT 2074 - What will going to bring this year? & How much ?

The latest from the mouth of The BIG,  a proved individual in any parameter in the present period.

An edited verbatim transcript 

The story of the financial savings getting huger and huger or large part of the savings in the household sector being invested in equity has just started.

A growing economy like India with reasonably good corporate governance practices, tax-free, I think India will grow nominal gross domestic product (GDP) at 12 percent. I see no way that Indian equity will not give you a return of 15 percent. Now you tell me one investment that I can sit in my office, have a liquid investment, borrow at very fine rates and get a 15 percent return. I do not see many investment opportunities like that. So by my sheer common sense, I feel that this money is going to continue and I think this is not even a flood, it is going to be a flood and it is going to be a tsunami.

In America, investment in mutual funds in equity, mutual funds went up from USD 162 billion in 1984-1985 to USD 1.3 trillion in 1994-1994. So once this starts and people gain there can always be a flood and you are living in a country with at least USD 400 billion of household savings. Indian equity wealth, household wealth in equity in India is 4 percent. In China it is 9 percent. In America it is 29 percent. So I have been shouting for the last 25 years, last 10-15 years but this is now finally happening. And I think this money, just a little has come, is going to be a flood, it is going to be a tsunami. So I see no way that Indians will not invest on a continuous basis in mutual funds.

In the stock market, there is a rule that if there is a seller, whoever he may be and the market keeps gaining, that seller does withdraw and has to withdraw. And if the market keeps losing and there is a buyer who keeps buying, he will have to withdraw. 

For the last four quarters, if we exclude six Nifty stocks which is State Bank of India, ICICI Bank, Axis Bank, Coal India, Tata Motors and Bharti, you know what has been the growth in earnings, quarter on quarter? 23.7 percent is the growth on Nifty's earnings if you exclude the earnings of these six stocks. Market cap will be about 5 percent of the Nifty or maybe 7 percent of the Nifty.

The market does not only price in the present and the past. Every economic agency, every economist is predicting that growth will go up in the second quarter and the next half. And if you look, people are also extrapolating. Now Morgan Stanley has come out with a report, India will be a USD 6 trillion economy by 2027 driven by privatisation, digitisation, reforms and demographics. So people are looking at 10 years, 15 years also in investment.
And look at it if India's GDP is expected to be USD 6 trillion in 2027 and USD 4,200 per capita income. If you have that kind of per capita income, what power it will unleash in consumer spending, in housing, in entertainment, in all consumption items. So I do not think surely market is scrip wise expensive and there is lot of, some Golmaal going on in some midcaps.(referring to valuations and unusual activity keeps on happening. It is a market, what have we got to do with that? Stay out. I am referring to valuations primarily and mainly in the new issues) And in the worst market is a new issue market. I think there is a biggest from there. But you cannot term that market is expensive and who are we to judge that market is expensive, it is 16 P/E or 20 P/E high. Who has said which P/E is high?
And if you look at the screen, I have some experience, I look at the screen every day. If you are bearish go to your hometown. So I do not see any, the screen tells us market is not willing to go down. There is the commitment but I do not think there is humungous commitment. There is a lot of commitment to come. The bad news came, growth will go down and this thing will happen with government. Nothing happened to the market. So I do not agree with these foreigners. They will come, their grandfathers will come, do not worry. It will take some time. And I do not agree with all this valuations nonsense.
See from 7,800 a rise to 10,200 I will not predict any floor, but I feel the money will supply into equity is going to increase, the foreign selling is going to moderate. The earnings are going to be very good and the screen says it refuses to go down. Nine out of 10 people I meet are bearish. So everybody is bearish, most people are. For a rise from 7,800 to 10,200 I see no turbulence at all. No one says to sell your wife's bangles and buy shares. I do not find anybody very anxious to buy shares, so I think we are just at the start of what is going to be a very long bull market. This is my opinion, I can be wrong. And all psychological and behavioural matters by which I judge markets also are in favour of the market.
If China keeps cutting capacity and the fact is that world growth is expected to be much better this year and more better next year, consumption of commodities can go up. So there you cannot have this kind of price increases without some shortage being there. I am bullish on the metal stocks and on steel stocks. And what is also in the favour of the buyer is that I do not see – Vedanta has gone from Rs 80 to Rs 320. Tata Steel has gone from Rs 260 to Rs 700. I do not see any fellow saying buy Tata Steel, sell everything and buy Tata Steel. That public participation which leads to a climax is just not there.
we are at 7 percent growth this year at 27-28 percent investment to GDP. China is at 45 percent. We have been, at times at 35 percent. I am sure that this investment to GDP is going to go up from 27-28 percent to 35-36 percent - that itself is a stickler for 150-200 bps growth in GDP. The predictions from 1.5 percent to 8 percent GDP growth because of GST. I stick at 1.5; 150 bps and that can cause another 50 bps rise in GDP. I think the resolution of NPAs and the productive use of those assets can contribute to GDP. So I do not see why and how - we have borne so much pain because of GST, demonetisation. I think once the National Company Law Tribunal's (NCLT) bankruptcy law is properly implemented, credit cost and interest cost in India will go down because slippages in the banking and other sectors of NPAs will be much lower in future.
Morgan Stanley says we will grow 10 percent in dollar terms. I totally agree with. I do not know why people are so bearish and say the market is high, money is going to correct. I do not agree with them.
We have risen from 7,800 to 9,900-10,000. A year or two could go by --- and I am talking from the Budget of 2016; the market could have a breather. There is nothing wrong in it but the reasons for the bull market are very much alive and the fundamentals of that bullishness will improve every passing day.  So it could be a year where it could be very good earnings growth. The market may not go up but I think it is unlikely. It's a market; we have to take it by the day.