May 30, 2014 Leave a comment
The following is an excerpt from a Rakesh Jhunjhunwala interview in the ET on the 27th of this month. Prescience?Wisdom?Wishful thinking?Motivated sound bytes?……….Time will tell.I thought it best to record the words for easy future reference.Here’s waiting for the structural and secular bull market that RJ speaks about!
During the challenging years of 2008-13, Indian corporates have restructured and become more competitive. Corporate governance has become better; and yet Indian investors have become more risk-averse and grossly underexposed to equity . We have come to believe that high interest rates, poor earnings growth and net outflows for domestic equity investors are the new normal. These factors are about to change, and for a very long time. This change is in inevitable and irreversible.
We are at the cusp of an era of strong policy frame work, business and investor friendly environment, elimination of supply-side constraints, initiation of a new capex cycle, falling interest rates, resumption of job creation, rising savings and a wall of foreign inflows combined with domestic outflows reversing into domestic inflows with a vengeance. While this is more obvious now, most of us are unable to comprehend the scale and the longevity of this change. We are at a stage where we are blinded by sudden light after being in a dark tunnel for years. We are unable to conceive the impact of a transition from the vicious cycle described above to a virtuous cycle the scale of which we have never experienced before. Read more of this post