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Rakesh Jhunjhunwala's systematic inflation. Eight points for Rakesh Jhunjhunwala's view on inflation. Point one Rakesh Jhunjhunwala always insisted investors should react at the very moment where the gains are to be locked in. When the inflation is about to rise, the smart investor should interpret that interest rates will also rise.
So, they should sell the interest rate sensitive stocks like automobile stocks, banking and infrastructure stocks and start buying defensive stocks like FMCG and pharma stocks. Similarly, now when the inflation is slowing down because the commodity prices are falling, investors should now anticipate tomorrow that interest rates will soften and slowly start buying interest rate sensitive stocks like banks, autos and infra.
Bottom fishing can be done here and the downside potential is limited, but on upside huge growth can be seen once the interest rate cycle starts to reverse. Point two, Rakesh Jhunjhunwala says don't worry about the macro stuff like fiscal deficit, inflation, etc. which are unknowable. Focus on what is knowable for investors who keep worrying about currency fluctuation rates, inflation, fiscal deficit, political turmoil, etc.
Don't worry about things that you neither know about nor can do anything about. It's not important. Instead, focus your energies on what you can and should know well enough, the business of the company you are investing in. Point three, keep buying if the problem are short-term ones. Rakesh Jhunjhunwala, with his sharp perspective, laid down the entire problem on two issues, inflation and government inaction.
Rakesh Jhunjhunwala said that inflation controls everything, interest rates, growth, and also pointed out that though there were good people in government and they knew what step to take, but they were unable to take big moves decisions. Rakesh Jhunjhunwala emphasized that problems like these are temporary in nature by categorically stating that the next three months are going to be a very difficult period for the markets.
Point three continued. What is embedded in this statement is that once inflation begins to cool down and the government does some action to bring some reforms in infrastructure, GST, etc., the stock markets would begin to soar again. Rakesh Jhunjhunwala made it explicit. If monsoon is good and commodity prices ease, which I personally expect, oil prices should be at 80-85 and some government action comes through and inflation may not have come down, but it becomes apparent that in future months inflation is going to come down, then the Indian markets will have a very strong rally after that.
So, I am saying that the next two to three months are uncertain depending on how events turn out. The period for the next nine months could be very good or could be okay. Point four. Question which basic things he has repeatedly laid emphasis upon regarding economy. He laid more emphasis on commodities prices on global scale, crude prices and Western happenings along with inflation and government action.
0.5 Rakesh Jhunjhunwala keeps a constant view on US payroll figures, the fall in commodity prices or a fall in inflation for any other reason. Therefore, the peak of interest rate cycle and then there for aggressive correcting of interest rates. Secondly, problem of hedging America, better growth in America.
0.6 When market seems bright, technically market seems well pulled, had a good monsoon, commodity prices had come down. I think we'll further come down and I think if inflation can be attacked or inflation can correct, which it could have commodity prices will come down, probably at good monsoon, peaked at the interest rate cycle and if interest rates come down, I think India will do very well.
Point seven, three things trouble us, inflation, government action / inaction and international happenings. Point eight, the very big factor for oil is liquidity and one thing which people don't mention that if the oil prices are high, the oil companies because of subsidy the government doesn't pay them, they stock of the liquidity and it causes interest rates to harden.
Also, it has effect on the current account deficit and fiscal situation, on inflation, on stock valuation and the oil prices won't settle down in a hurry.
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