Rakesh Jhunjhunwala, popularly known as India’s Warren Buffet, has a bullish long-term outlook. He is a well-known equity investment trader in India. Speaking to Namrata Brar of NDTV, he says that the global financial crisis doesn’t mean that India will not prosper.  Jhunjhunwala fundamentally believes that India is going to be an outperforming market. He further says that he is bullish on the Indian rupee. He is optimistic about india’s growth. "If the Indian economy performs well, the money will come from Timbaktu, but it will come," he says.

NDTV: Let me start with the biggest fear ---Is the world crashing down?
RAKESH JHUNJHUNWALA::  Well, at the moment it is. But it has to stop somewhere. I won’t say that the world is not crashing down. It is crashing down but it has to stop to find the flow somewhere.

NDTV: What is that flow, Rakesh?

RAKESH JHUNJHUNWALA: I wish I knew…

NDTV: Somewhere it becomes impossible to say. You know gold is being sold for the value of brass.. so somewhere that logic comes in.

RAKESH JHUNJHUNWALA: Markets don’t always listen to logic in the short term, but as far as India is concerned, I think that there is a very good opportunity and fundamentally I believe that India is going to be an out performing market.

NDTV: You don’t see the level of 3200 or sub-10000 which that every body is talking about now?

RAKESH JHUNJHUNWALA: I feel anything can happen in the market, in the condition that we are, I think we will not get there easily and market is showing resistance to growing. It’s reacting to bearish news with great resistance. So I feel the market will now break its bottom of 3800. It may break it tomorrow. If it doesn’t for a day or two I feel it could be a different situation.

NDTV: So is the most fragile situation right now, for a couple of days. If we manage to tide over that we can hold our own?

RAKESH JHUNJHUNWALA: Absolutely!

NDTV: Let me talk a little more about this global financial mess. You had spoken about this in Oct 07 that you fear America is in deep problems.

RAKESH JHUNJHUNWALA: Absolutely, it still is.

NDTV: But it is getting worse.

RAKESH JHUNJHUNWALA: The Dow was 1000 in 1965, it was2000 in 1989. It doesn’t mean that if America has trouble, India is not going to prosper, to grow. We are on a different stage of economic development. And also India has got vast amounts of local markets and the platforms for the local money to come to the markets. I don’t see any reason why Americans outside are addressing the problem. Although I feel that is a big hangover or a big problem from what America has done in the past. I call that the hangover, when the American economy was growing on credit. Now they can take steps only to mitigate the hangover. America’s growth is going to be in some kind of depression for another two years. Despite that I’m not ready to believe that India will not grow. India will grow.

NDTV: So India doesn’t need to go to a rehab centre when America is trying to get over its addiction

RAKESH JHUNJHUNWALA: I don’t think so. Indians don’t indulge in those kinds of excesses. It has a different kind of economic growth cycle. Also the exposure of Indian equity to the world is very, very low, to India and to the world in general. So there is a lot of money to come in the Indian markets. And there is a lot of liquidity in the world, don’t forget.

NDTV: But you are bringing in a contrary here, because the world is saying that liquidity is over and whatever there is will disappear shortly. So where is the liquidity coming from, with Lehman gone, Merrill Lynch gone. There are problems with other names. I won’t go into names.

RAKESH JHUNJHUNWALA: But I suppose America’s market capitalization is $8-9 trillion. What’s India’s? One trillion? There is so much local money to come. Look at the local savings; I personally feel if India’s economic growth is 8-9 per cent in the next 2-3 years, I see 40-50 billion local money coming in the market every year.

NDTV: But do you think India’s economic growth can be 8-9 per cent, because even that has become a problem these days, with high interest rates and high inflation.

RAKESH JHUNJHUNWALA: Now I feel that inflation is peak.

NDTV: So there will be no increase in interest rates?

RAKESH JHUNJHUNWALA: I feel so. The world is going into an era where its not worried about inflation, its worried about growth. Indonesia cut two days back. Central banks worldwide are easing. I feel the commodity bull market is temporarily over and I think it’s not commodity led inflation. In most countries the challenge is not inflation but growth. There are already negative inflation figures in England and America.

NDTV: So do you feel the problem of this lagged effect on growth will not happen?

RAKESH JHUNJHUNWALA: The problem is coming to a climax and markets recognize things in advance. Inflation is peaked and we’ll going down much faster than people are imagining, in my opinion. I reserve the right to be wrong. There is no case for increase in inflation rates. It’s not demand-led inflation it’s a commodity-led inflation. And commodity prices can change substantially. That correction in commodity prices has still to be reflected in our deflation figures. And the government is not worried about food. Nobody is borrowing money and eating food. Secondly look at the Consumer Price Index, its 400-500- basis points lower than Wholesale Price Index. I’m quite hopeful and optimistic that Inflation has peaked in India, Interest rates have peaked, they will come down. And don’t forget that what are the benefits of liberalization is that we have made a structural trend change in inflation. During the period up to 2000 inflation was 8-9 per cent, then between 2002-2007 inflation was 5-6 per cent. That was structural change not just trend change. So if the commodity cycle does not disturb India, I don’t see inflation higher than 5-6 per cent

NDTV: I want to talk about interest rates, even if they peak, can’t they come down quickly? Normally they don’t go up quickly this time they have perhaps.

RAKESH JHUNJHUNWALA:I think the world scenario will force the government to reduce interest rates.

NDTV: How much? Substantially lower?

RAKESH JHUNJHUNWALA: I don’t know. I can predict that. That may happen in 6-9 months, I’m not saying it will happen tomorrow. The markets can smell it much earlier,

NDTV: Are you smelling some of it?

RAKESH JHUNJHUNWALA: I am.

NDTV: Lets talk about crude and its correlation. I think I’ve been asking this endlessly ever since crude has been going up. Where are you in that take of, ‘crude comes down, India goes up’?

RAKESH JHUNJHUNWALA: I think I would put crude bet $80-$100 a barrel.

NDTV: And we can live with that?

RAKESH JHUNJHUNWALA: Yes we can live with that. And also India is going to get this gas and this oil. It will save India 50 billion $ a year..

NDTV: But somewhere the emphasis of gas vs oil is not being discussed.

I read in a report that it is as much as 35 per cent of our fuel consumption by 2012.

RAKESH JHUNJHUNWALA: That’s huge, 35per cent means that $40-$50 billion worth fuel that we were importing will be left in India. It’s important.

NDTV: So with that you will also play gas-based stories. Because there are huge benefits despite the pricing problems.

RAKESH JHUNJHUNWALA: Yes I already have a shareholding in a company that has a good gas field. If there are good opportunities I will invest.

NDTV: Back to the global financial crisis. I want to know how does it affect the Indian Companies? You have news that ICICI has already admitted that they had some exposure to Lehman bonds, some 4per cent is the kind of exposure they have with the global I-banks. How much more bad new is there in the system?

RAKESH JHUNJHUNWALA: I will consider two aspects there. As far as banking system is concerned, it has the lowest exposure of any banking system of any size to the world global crisis. Except ICICI bank I don’t think any other bank has any other meaningful exposure. If SBI has a half-basis points exposure, how does that matter? So I don’t think India is affected. Yes it is temporarily affected by the sentiment against the emerging money markets. I personally feel that could be bad news in the short term. But in the medium and the long term, I feel that you will narrow down where there is crisis, the number of asset classes, and the countries that people don’t like to invest. Once people get over this crisis and they take a breath and when they find India outperforming, they will investigate India. We’ll find far more investors in India than anywhere else. So I feel that the result of this crisis would be that India will attract far more money. It’s my opinion. I reserve the right to be wrong.

NDTV: But somewhere everyone avoids markets like India, that is a high beta emerging market. When your house is collapsing why would you not look to resolving that first.

RAKESH JHUNJHUNWALA: Everybody’s house in America is not collapsing. If India is growing faster, there is a good trading system, the currency is stable, why would people not invest in India.?

NDTV: The currency is also not looking stable.

RAKESH JHUNJHUNWALA: I think I’m bullish on the rupee against the dollar. I would invest in the dollar with a right mind.

NDTV: But why only dollar or rupee? You can invest in Yen. You can invest in the Swiss frank.

RAKESH JHUNJHUNWALA: There are all kinds of people who would like to invest in different assets. How much money does India need a year. Not more than $10-20 billion. It cannot absorb more than that. What money is that? It’s nothing.

NDTV: So that will come from significant global investors?

RAKESH JHUNJHUNWALA: I don’t know from where, global or Indian. If the Indian economy performs well, the money will come from Timbaktu, but it will come.

NDTV: So why are the FIIs not doing so?

RAKESH JHUNJHUNWALA: Ask them. They are the biggest buyers at 6000-6100. Ask them why they are not buying. They bought Brazil in June. Did you ask them why they are buying? You think they are the biggest buyers? That doesn’t mean that they are the best performers and I have to follow them.

NDTV: When will you buy this market?

RAKESH JHUNJHUNWALA: I don’t discuss my personal traits. I have my life invested in this market. I have 98 per cent of my life invested here. All my other assets would make up just 2 per cent.

NDTV: So you don’t look at getting out of equity and diversifying your risk.

RAKESH JHUNJHUNWALA: I see a far bigger bull market, the mother of bull markets in another 4-5 years. I’ll exit at that time.

NDTV: You had commented about the previous bull markets and the previous bubble-burst, and the PE at those times was significantly different from the PE at 21000. You said it was 62 in 1992 and we are trading at 21-times more now. Do you feel that this time the correction was not justified to that extent was there no bubble-burst?

RAKESH JHUNJHUNWALA: No the correction was justified, that is why I was cautious. First of all the PEs were extended, the kind of scripts were given were of absolutely of low quality. If you look at the attempts of issues and the valuation issues that were coming and the manner in which the people were wrapping up those issues, I think correction is inevitable or a fall is inevitable.

NDTV: Usually people get in at times when the market is driving. For them the fear has come quite rapidly?

RAKESH JHUNJHUNWALA: Well there are only two emotions that drive us, fear and greed. You must balance both well to do well in the markets.

NDTV:Ok. Right now you are not even looking at diversifying. There are not enough asset classes to choose from?

RAKESH JHUNJHUNWALA: No, I’m investing in all kinds of sectors.

NDTV: What sectors?

RAKESH JHUNJHUNWALA: Pharma, security, BPOs, infrastructure, restaurants, schools, hospitals, internet, stock marketing and capital broking, biofuel companies.

NDTV: These are budding India stories?

RAKESH JHUNJHUNWALA:  Not budding. They are not large companies. I don’t invest large amounts. They are doing reasonably well.

NDTV: If you look at your portfolio that is openly disclosed at least where there is more than one per cent, it is a big diversified mix. I know Titan is the largest, but you have got lots of other retail, you’ve got Provoke, Pantaloons, Metro Shoes, Infotech, Geometric software, construction. I want to know how do you figure out, how do you balance your portfolio? Every body talks of weightage on particular sectors.

RAKESH JHUNJHUNWALA: I just look at the entry price and I look at the terminal price at which I could sell. In between, I don’t look at any thing else. Yes, I see that the performance I envisage in a company is on track. I don’t allocate money to sectors, I don’t do analysis that ‘banking is going up, sell these investments. See, as Mr. Buffet has said there are few good dishes that you can take in life. So stick to them and don’t act oversmart. Don’t ‘Buy this, sell that’.

NDTV: But Mr. Buffet sticks to very safe businesses, but you stick to emerging business?

RAKESH JHUNJHUNWALA: So, I’m not trying to imitate him or be like him. I learn a lot from him but that doesn’t mean I’m going to copy him.

NDTV: What about your peers. What is the sense that you get from the trading community? You must be getting a signal at least that every body is shaken.

RAKESH JHUNJHUNWALA: Yes, they are shaken. I think that there is far more confidence in India about the Indians, than the foreigners rightly saying. Peers are shaken but still there is faith. And I think there is reason to have faith.

NDTV: People are also calling this crisis a once in a century disaster. I’m referring to the 1930’s disaster. Do you get that feeling since we are not trading in the 30’s?

RAKESH JHUNJHUNWALA: Today you have a far more active and proactive world. !930 was the first experience. I think there are reasons to drop some kinds of parallels in excesses of 1929 and 2006. But the world has reacted much faster in America and collected itself much faster and at that moment America was far more a part of the World. I don’t think that we will have a deep slowdown in the western world, not something like the 1930. but the biggest thing is that there should not be a lack of confidence. There is still confidence in America, that they’ll correct the wrong. And America as a society has evolved, it is the most competitive cutting-edge society, despite what has happened. There are deep leverages and excesses and there will be a slowdown, but not a situation like 1930.

NDTV: But there’ll be a new global financial order, there be a consortium of banks coming together, as stand alone I-banks will not survive?

RAKESH JHUNJHUNWALA: I think it’s too early to say what will be the order, lets first make the base. We will know after a year and half or two years. Let’s not speculate.

NDTV: After we hit the bottom, whenever we hit that, how much time would it take to move up?

RAKESH JHUNJHUNWALA: I think we have already hit the bottom last time at 3700 on the Nifty. I don’t rule it but feel so, we have made the bottom. There’s no mathematical formula to calculate the time. It is difficult to say that. The market will have to make a range and trade for a year or so. It will have to make a base and then the real move will begin.

NDTV: In that range, there will also be a lot of stocks which would fare better than average?

RAKESH JHUNJHUNWALA: Yes, absolutely.

NDTV: And most of them would be large caps index related stocks ?

RAKESH JHUNJHUNWALA: Difficult to say.

NDTV: But that is the common philosophy?

RAKESH JHUNJHUNWALA: What is common is not generally done.

NDTV: But will there also be stocks that are beaten down the maximum. The real estate is beaten, financials have been battered.

RAKESH JHUNJHUNWALA: Financials have already come back. State bank is always 50-55 per cent up from the bottom. I think the sectors which are worst beaten up will participate in the next bull market.

NDTV: The staples, the defensives?

RAKESH JHUNJHUNWALA: Absolutely. I’m talking about the range. We cannot generalize all this.

NDTV: Ok. When you talk to companies do they come up with fears saying that biz is sig slowed down, we cannot generate capitals, and projects are on hold.

RAKESH JHUNJHUNWALA: I don’t think that is happening. The companies that are over-ambitious, those that try to run even before they can walk, they have such problems. Companies that are well-capitalised don’t face this. Even if the projects are on  hold and promoters offer lesser valuation, they agree.

NDTV: When you said that you are 98 per cent invested in equity, what is the 2 per cent.

RAKESH JHUNJHUNWALA: I have a house. I have some investments in real estate.

NDTV: Are you exposing yourself to safe haven investments such as gold?

RAKESH JHUNJHUNWALA: No, 2 per cent is compulsive assets. I believe only in equity. Even if I invest one per cent else where, what difference would it make to my balance sheet. I’m confident even in the worst situation, even if Nifty is at 1500, the remaining will be enough for me.

NDTV: Let’s talk about ‘Mother of all bull runs’.  How will it trigger your mind?

RAKESH JHUNJHUNWALA: The internal growth will be surpassing double digits.

NDTV: And on our own structural fundamentals this is just a cyclical correction?

RAKESH JHUNJHUNWALA: Absolutely.

NDTV: In the new run, you think new highs of what kind can be made, approximately, even a PE value.

RAKESH JHUNJHUNWALA: I think not less than 25 times PE value next bullrun. I don’t know when, could be 5-yrs or so. I’m confident of basic stability and growth prospects of this country and there is a vast under exposure of local Indians to equity and we have the platforms and we are introducing mechanisms to expose them.