Rakesh Jhunjhunwala says the worst may be over for the Indian equity market. Stocks are poised to recover from their biggest annual decline.
Companies in the Sensex are valued at less than half their four-year average.
Investors will look beyond last month’s terror attacks as the country is growing faster than almost every other market, he said.
“India will see the mother of all bull runs in the next 4-5 years, boosted by double-digit economic growth and increased investment by domestic investors, including pension and insurance funds,” he said. The Sensex has risen 7% since the 26/11 attacks, trimming this year’s decline to 54%. The slump left the index valued at 9.6 times the earnings of its 30 companies, compared with a four-year average of 19.2.
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“We will see a period of great uncertainty, but great potential too,” said Mr Jhunjhunwala. Mark Mobius, executive chairman at Templeton Asset Management, and Hugh Young , MD at Aberdeen Asset Management, agree with Mr Jhunjhunwala. Mr Mobius said economic growth will help stocks recover. Aberdeen is seeking investments in the Indian market.
“Great companies which were at that time fully valued have come back down to good valuations,” Mr Young said. India “is now looking a lot more attractive,” he said.
Annual inflation in India may drop to less than 5% in the next two months, Mr Jhunjhunwala said. The rupee may strengthen to between Rs 44 and Rs 45 against the dollar by March. He recommends investors bet on gains in equities, commodities and emerging-market currencies, and declines in the dollar.
Source: Economic Times
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