Rakesh Jhunjhunwala’s two interviews, one before the election results, and the other after NAMO won by a huge majority, tells you the entire story of what you need to do. The Badshah has anticipated our apprehensions and given simple and clear-cut answers on why the time is opportune to aggressively buy stocks
Why this bullishness/ optimism?
Rakesh Jhunjhunwala pointed out that it is a historical event and the first time in the history of Independent India that a non-Congress party has got a majority in Parliament in the Lok Sabha. He explained that the people are voting for fulfillment of their aspirations, development & good infrastructure.
The Oracle of Mumbai also explained that this was a management change. The new management is made up of very well-known persons with a proven track record and the ability to handle different & near-impossible situations. They have the vision and the potential to transform India, he added.
Rakesh cited the example of a company with strong fundamentals being run by a mediocre management. When a management with proven credentials takes over the company, there is hope in the air of prosperity.
Extent of rise in Sensex & Nifty:
Rakesh explained that a bull market is a function of earnings and margin expansion and PE expansion. The earnings have bottomed out and earnings growth would expand from 15% to 18% to 20% as economic growth in India expands and better policy in investment comes through. The effect of this is that the Index would double and even triple he said.
“I have no doubts in my mind that we have started the biggest bull market that at least I will see in my lifetime” the Badshah said with a big smile on his face.
What type of stocks to buy?
Rakesh Jhunjhunwala emphasized that even in the current rally, it was the top-quality stocks that were making new highs. He advised investors to stick to the basics. “Let each investor choose whatever horse he wants. There is a buffet, there are lots of dishes. Eat what you want, but do not overeat” were his words of wisdom. (Check out the top-quality stocks recommended by Basant Maheshwari & HDFC Securities).
About the lack of frenzy amongst the retail investors:
Rakesh Jhunjhunwala explained that the fact that there was lack of frenzy told you that this Bull market had substance in it and would not collapse like a pack of cards. “When the frenzy comes, the market will climax” he said.
Is it too much too soon?
Rakesh explained that one need not worry that everything was happening too fast because the Index had been stagnant for 5 years. It was merely catching up for lost time. The P/E (at 15 based on FY 15 EPS) is still very reasonable and we are not in bubble territory (PE of 28.5 in 2008) were his words of comfort.
If foreigners have such confidence in India, why not the retail investor?
Rakesh also added that India has got great scope to grow. Indian people have great skills, only what you needed is confidence and the ability of decision making and process simplification. He pointed out that foreigners (FIIs) had great confidence in India and that is why they were pumping in billions of dollars into Indian equities. He advised Indian retail investors to show the same confidence in their own Country.
“Believe in India and invest in India” the Oracle of Mumbai said with a gentle smile on his face.
Should we wait for a correction to invest?
Rakesh Jhunjhunwala suggested that it was futile to wait for a correction because while it was certain that a correction would happen it was not known when that would be and to what extent. So, if the correction happened after the Nifty had surged to 9,000 and to the extent of 10%, you would kick yourself for not investing today, he said.
View of other stock wizards on the Bull market:
At this stage, we must also take note of the brilliant advice given by Motilal Oswal. Motilal has pointed out that once NAMO gets going, a feverish pitch will grip the stock market. The first thing that NAMO will do is to present a budget. It will be an investor-friendly budget. The anticipation, and the fulfillment, of NAMO’s promises will send the market into a new orbit, Motilal assured.
Basant Maheshwari got more practical and identified 5 top stocks that will benefit the most as a result of NAMOnomics.
HDFC Securities have also released an excellent research report in which they have pointed out that “the dark days of gloom, indecision & judicial activism are over” and that we should “Get ready to welcome a recharged, transformed & aggressive India”. HDFC Sec has identified 4 large-cap & 5 mid-cap stocks to invest in.