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Rakesh Jhunjhunwala still sees an NDA government, but advises caution

Markets may correct in the short term. But in a bull market the correction is always sharp, swift and short-lived: Rakesh Jhunjunwala
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Rakesh Jhunjhunwala, one of India’s biggest stock market investors, advised caution ahead of Lok Sabha elections even as he said that the ruling government is likely to come back to power.

He was speaking on a day when the market hit new highs with a little over a month to go before election results. He was part of a panel discussion marking the launch of the latest entrant in the mutual fund industry — the Sun Pharmaceutical Industries copromoter Sudhir Valia-backed ITI Mutual Fund. Others on the panel were Ramesh Damani, member, Bombay Stock Exchange (BSE); Nimesh Shah, Managing Director and chief executive officer at ICICI Prudential Asset Management Company; and George Heber Joseph, chief executive officer and chief investment officer at ITI Mutual Fund.

Both the benchmark indices closed at all-time highs on Tuesday — the S&P BSE Sensex closed at 39,275.64 while the National Stock Exchange’s Nifty 50 ended at 11,787.15.

“Today is a new high in the market but all the bars are empty!” said Jhunjhunwala, suggesting that the market has been driven higher by a few stocks, rather than seeing a broad-based rally. However, he remained bullish on expectations of a pickup in the capex cycle and said that the phase of the bad loan crisis has passed.

Jhunjunwala said he expects the ruling National Democratic Alliance (NDA) to come back to power at the Centre. He added that the Bharatiya Janata Party (BJP) may not win a single-party majority in the Lok Sabha. However, he expects the ruling party to be a dominant partner in the new government.

Ramesh Damani advised investors against positioning themselves on the certainty of a particular party coming to power. He said markets have had a bad track-record in predicting election outcomes, and investors should be careful of being overly assured about a given outcome.

“I think the market is pricing another comfortable majority for the NDA, which may not happen,” he said.

Nimesh Shah said certain government-owned companies with good returns on equity and banks with a good liability franchise look good. He was also bullish on pharmaceutical and healthcare segments.

George Heber Joseph, chief executive officer and chief investment officer at ITI Mutual Fund, too was bullish on the pharma and healthcare segment, pointing out that the share of the wallet for these segments is likely to increase.

Jhunjhunwala also sounded another note of caution on the nature of the latest bull-run. He said it has failed to benefit the majority of people, which could result in the imposition of taxes for redistribution.

Source: Maalaimalar