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what a delight to have you back on E Mr Jun thank you for calling me and I hope all the adjectives you use are true I hope I deserve them and I live up to them you know I'm going to start with something which I picked up on my WhatsApp couple of days ago and it says there's a strong Market rumor I have that WhatsApp message on my phone the strong Market rumor that big bull which is you has informed his close circle of friends and his associates that markets have topped out and now we may see a significant correction going forward have you told your friends like this well uh nikunj I think such rumors are most deplorable I can always be right and wrong I don't know who's spreading them and for what reason but I think we are in the midst of a bull market and I think we're in a very early stages of it because bull markets cannot end you know bu what are bull markets bull markets have valuation fro and bull markets have commitment fraud right now just by validation fraud bull markets don't don't you know don't end has M beautifully said that there's a difference between commodi and stocks in Commodities when when prices go up demand goes down in stocks when prices go up demand goes up right so bull markets don't care for valuation flots and then there is a commitment fra right unless the two combined a bull market top is never made along with bad news so you must have a commitment fraud which I don't think we have at all most people have not participate they are questioning the bull market right and there is no there is some amount of valuation fraud I would say but very minimal and that has to be combined with bad news having said that I think we are just in the initial stages of what I think is going to be a bull market which is going to put 200 2003 which will make us forget 2003 in my opinion also having said that markets have gone from 6,800 to 8,800 8,900 in the last four months five months markets could correct any time right but it's my opinion that market even if they correct are going to correct more time wise rather than price wise I find it the purpose of this interview also is I don't want investors to be misguided I don't think we are nowhere nowhere near a top on all indicators if you see earnings growth returns in the last three years P ratios P ratios are high because there Market is anticipating earnings growth right industrial capacity utilization interest rates right then any kind of commitment so I don't think I mean I I hate that you know people should misguide investors I don't think we are in anywhere near a top we could have a correction anytime you had a 30% right in 5 months but that doesn't mean that this bull market is going to end and I'm not an adviser to anybody except my wife right so I don't Comm you know I don't I discuss things with people I don't so I want to say distinctly that we are in a bull market it's in the midst of just the starting I think we are where we were in 2003 right so don't get misled by such rumors so I'll take the clock back to 2004 we had a conversation different Forum I think the sensex was 6,000 or 7,000 and you said in next three years sensex could be 18 19,000 I raised my eyebrows that time that time on paper it looked unbelievable so are you making a case that in next 3 to four years the index could actually double well I can predict the direction not the depth even if I have some prediction I won't like to make it sly right but I think the the direction is surely upwards uh let me draw your attention to what going on in the world right now growth is a concern there are zero interest rates there is an outcome of us pres presidential election still which is still you know unknown uh economic growth is not real at least at Global level so don't you think that at the global level there is a lot of complacency I don't think that's complexive because globally I think history is going to change all these smart people JW s drug mailer everybody is barish but the fact remains you know Warren buff said that interest rates act like a gravity on value valuations right now we at valuations in in America or in England or in Japan based on interest rates in America 4 to 5% now interest rates in America 25.5% now unless until interest rates go up or there is some geopolitical problem or a crisis of confidence how will the bull market break there right you are you are having 1% yield in the bank you have negative interest rates in Europe and Japan what is the don't you want to buy a stock with 5% so I don't think I first of all we have to recalibrate P according to me because these in rates are far more permanent even if they go up they're not going to those 5% levels right so I think we got to have some fresh thinking right before the markets abroad are going to conct in any significant I think so whatever be people's opinion globally growth may be slow but in the interest rates being what they are I don't think markets are going to correct that easily unless we have a gain in interest rates but why are we staring at a very disjointed world bond markets are pricing in almost a recession gold prices have gone up 20% this year us equities are also at a record high uh is this all because of liquidity that the the world has become fractured no but is that it may be because of liquidity but you got to ask yourself is this liquidity temporary or permanent it is temporary if interest R are going to dramatically go if us interest rates go from 0.5 to 75 point or 1% is the liquidity going to go away I don't see interest rat is going up 1 and half 2% in America so you have to recalibrate the peace with the new interest rates now the conventional argument is that we are trading above the historical P band at least for Benchmark in DS do you think it's time to revisit that conventional but sometime history I think so sometime history history does not recur I don't say that market won't Rec won't correct but the new reality is that we are at low interest rates those interest rates are going to be low for a considerable period of time right and therefore the PS have to you know the historical P may not be what the markets are going to determine because what are the Alternatives you know interest rate deposit is 1% in Europe it's negative so how should uh Mr Jala investor invest in this kind of an environment because valuations aren't exactly attractive there is no other asset class which will give you Superior return return than equities it looks like a bull market but there's no participation well that's how bull market start they end with humongous participation but they start with very low participation markets go up people question see I think when markets go up and there is no manipulation in markets and people question the market going up and it keeps going up that's a true bull market right the ultimate Bedrock for anybody because you know what happen participation people will say oh today Market is very high this that 5% lower they'll be buying uh the Bedrock of any bull market is ultimately earnings and markets have gone wrong in in their earning estimates but do you think now we could be in for an earning surprise rather than an earning disappointment I think so because you know earning first of all the in India the effect of low interest rates and I think further low interest rates has to be priced in right second thing is Market is anticipating a growth in earnings Market has been wrong in the last two years right but that's not going to continue earnings are going to grow because you'll have better demand see you look at the place look at look at what has happened to Asian pains I have no interest in Asian pains wherever there is a Resurgence of demand you look at the kind of profit growth and I think in India there is going to be a Resurgence of Demand with time in every sector and we are working towards it within infrastructure and each sector has a effect on each other you look at the tile sector you look at you know wherever there is good demand growth the company stocks have just shut up and this is going to spread in all sectors in time to come so what we think the P are high but what Market is anticipating is it's pricing stocks with the expectation that there will be Resurgence of demand which will lead to Resurgence of earnings and let's not forget one thing that you know lot of companies have become very very very efficient compared to by circumstances capacity utilization is 69% today I think in the industrial sector in 2009 2008 it was 8 85% so when this capacitation goes up the growth in earnings will be disproportionate to the growth in sales right there the markets may not go up so much when the actual earnings come around because Market is anticipating the growth in earnings so if I look at the complexion of nifty numbers 40 45% of your nifty50 numbers are still Global in nature whether it is it or Pharma that's the problem area so the aggregate earnings may not go up because of global problems but that's a fact no that in any bull market the large caps first underperform and I can't believe that with time Indian farmer and Indian it will not will not perform every time people have have question with the Indian farmer Indian it will grow I mean every time it has grown and if the application of software is going to go through the roof right then how will Indian companies see there has to be a period of consolidation I think that's what happening in the IT industry similarly in farma Hing India is going to be a world powered in Farmer we have the lowest cost we have good technology Indian companies are gaining size and I want to give you an example you know about Hindustan Li in 2009 in 2002 or 2001 post 911 when the market made a low Hindustan liver was 320 when the index was 6,000 in 2004 Hindustan Li was 1 15 right and that's therefore the it is you know a lot of people ask about infosis that could be correct in the initial stages of a bull market the large caps are going to underperform and I don't believe that it and farmer are going not going to be growth areas for it it could be for 6 months 9 months because the application of Information Technology is just going through the roof I mean today a city people are bearish and City Bank is giving a$1 billion single contract to digitalize the bank and I think the competency of Indian farmer companies is just going up by the day so whatever hum and drum which we hear in the IT industry that Indian it companies have lost their Mojo they're losing out to the new digital world do you think this is a period of adjustment I think so it's a period of consolidation and adjustment they're still growing at 10 to 15% and by they're now acquiring International size I mean I think if I'm not wrong you know TCS profit will be $4 billion these kind of companies are not going to go anywhere in a hurry you know when I started my career the definition of top four it was TCS infosis vipro and H Tech if I look at the definition of top four in it the definition is still same the one and two keeps on changing so do you think one should actually only stick with large cap it names rather than well I don't want to advise investor what they should buy they should not buy but I surely feel that the correction in the in the software industry stocks is something which is going to end and ultimately the stocks are going to perform you make your choice now Farm has some real concerns usfda could be more like an regulatory hurdle I'm sure they will be able to overcome some of those hurdles some companies have managed to do that but the other concern is that there is a serious erosion and pricing well the first one I can tell you that I think this you know this fdm problem for Pharma companies was more cultural you know you can use any methods but now Indians are fast Learners they realiz right and I think all companies are taking steps to ensure that they follow the FDA rules to the last line the comma in the full stop and I think we are not going to face this kind of regulatory hurdles in the Pharma industry in future maybe I mean they will be there but it will be very few because that culture has changed as for regards I think people say there's erosion in pricing but you know that's also going to kill competition ultimately so there could be a period when you know for a year when there will be erosion erosion was always there but I think that will die down with time and you know these companies have made great performance you know in my have held you I'm not recommending Lupin I'm not saying but I'm I'm only telling you facts that I've had Lupin for 14 years there were 2 threee periods when Lupin gave me no return and the market performed and I still L on and what a return I got I mean it's 125 to 15,000 all right so there are times when you know stocks don't perform because they Lupin has gone from 600 to 2,000 it's going to correct I'm not sing you buy Lupin I'm not recommending Lupin I'm a general example but you are you are convinced the best best practices Lupin is following well I don't want to commit on any individual company uh but like in it we've seen that how the definition of large four or the big three has not changed within Farm also do you think the definition of big three will not change I think so these companies are now too distinct from their competitors to really you know for some to some new to come and upsurge them because see when these companies get large they've got cash flows cash flows give you the ability to invest and they don't get large without qualtity of invest of management an opportunity maybe the opportunity when you know was such that may not be there for the for new companies so I think the 1 2 3 four five of farmer companies Al They 1 2 3 4 Auto change but the five company are largely going to REM this find us on Facebook at facebook.com/ etow and don't forget to click the like button you can also 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