Bull run may go bust in 2 months: Jhunjhunwala

Big bull Rakesh Jhunjhunwala today said the current bull run might “go bust” in the next one or two months. “If you see the formation of the indices, all stocks are going up, all indices are going up. There are minor corrections at every point. You cannot have this kind of rise — a peak without a burst. I think the burst will come within one or two months,” said Jhunjhunwala, partner, Rare Enterprises.

However, he said “I have a right to be wrong and I may change my opinion very fast.”

Jhunjhunwala, however, said the long-term growth story was intact as Indian stock markets could receive $60 billion worth of domestic inflows in the next two years. “I remain bullish on markets. The flow of money is just going to go through the roof”, he said on the sidelines of a private equity seminar here today.

The local money invested in markets had been much more than foreign institutional investor (FII) inflows in the last five years, Jhunjhunwala said.

He said there was still some pain left for the economies of the west. “I think the next two-three years are going to be far slower for the western world than for the rest,” he said.

The Sensex has gone up by 112 per cent to 17,000 levels from its lows of 8,000 in November. FIIs have pumped in more than $12 billion in stocks so far this year. “India’s economic growth should continue to be 12-14 per cent for the next five years. I think the factors that are driving this growth are irreversible — whether it is skill, tolerance, democracy or demographics. And if growth in corporate profits is going to be a percentage of the nominal gross domestic product growth, I do not see a reason why corporates should not grow between 15-17 per cent compounded” , said Jhunjhunwala.

He added, “Indian economy has responded extremely well to the downturn and has surprised me on the positive side. There is no reason why India should raise interest rates. I don’t see a rate hike before March. There’s so much of liquidity out there”.

Speaking about his investments in the unlisted space, Rakesh Jhunjhunwala said he made lot of money on some of his investments. He referred to a company in which he had bought 30 per cent in 2006 for Rs 20 crore and privately placed 10 per cent for Rs 1,800 crore.

“The essence of private equity is nurturing. Private equity is all about opportunities and entrepreneurship. I do not approach any investment with a closed mind. Listed or unlisted does not matter much. I will not give a higher valuation just because the company is listed”, he added.

Jhunjhunwala said he would not invest in start-ups. “I do not want to invest in very young companies as you have to nurture them and bringing them to size is a bit painful”, he said.

He also asked private equity funds not to be control-freaks. “Entrepreneurs have issues about giving up control. I tell the entrepreneur it’s his business and that I am a transient investor. It’s his dream that we are going to work through here. With our knowledge of public markets and financial worlds, most entrepreneurs welcome our knowledge on the basis of what is the financial structuring that they should do, or when should they list, when should they raise money, what is the appetite — but on operational matters.”