Sunday, March 6, 2011

Thought of the Month!!

Q: Do you think this is just a 6-9 month kind of tough phase after which we get back onto a bullish kind of trajectory for India?

Jhunjhunwala: I would like to make two observations, although I agree with Ruchir that financial speculation is playing a very large part in oil prices. But even if Libya is solved tomorrow, the problem is how do you know whether something is going to happen in Saudi Arabia or not. I have not read anywhere in any part of the international press, anything about any problem in Saudi Arabia or Kuwait.

But still they say there is this lurking fear and to my mind what troubles me is why the Saudi Arabian stock market is down 24%. So even if the financial speculation is going correct there is always going to be a risk premium for the next 3-9 months on oil prices. If nothing happens in 3-9 months then people will tend to forget. Second observation I would like to make is that the Indian public has never participated in this rise from 2800-2900 effectively.

Q: Is 5200 the bottom?

Kela: I am not evading the question. My mind is very clear. Whether 5,200, 5,000 or 5,600. We don't know where the index is. I am really focused this year to identify good companies, buy them from a 3-year, 5-year perspective. This is one of those 2004 to 2006 era where across the board you are getting companies really cheap.

Today we ran some sensitivity. There are 80% stocks trading below 2007 peak levels while in these 50% of these cases earnings have doubled from 2007 levels. So actually valuations have become 25% of what it used to be in 2007-2008 levels. So I am really focused this time around. We can get into a global debate where the markets are. But finally the money is being made when you invest in the right companies.


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