In an exclusive interview to CNBC-TV18's Shereen Bhan, India's 'big bull' and a billionaire investor Rakesh Jhunjhunwala of Rare Enterprises said 2017 was a year of extraordinary gains and 2018 will be a year of consolidation.
He said, "I personally feel that markets have had a tremendous rise. We are now correcting and if you look at the long rise that we have had, I would say it is a very poor correction."
He added, "I believe that bull markets cannot end at these level of profits to gross domestic product (GDP)."
Jhunjhunwala believes that capital investment cycle has just begun. "In 2003-2002, investment to GDP was about 27 percent, savings were about 28-29 percent. By 2008, both were about 37-38 percent. So, you have a level where percentage of profits to GDP is at one of the lowest levels."
He said the flow of local money into Indian markets is just the beginning and the it is not going to stop.
Abhi to khali trailer aaya hai, he added.“The index may have lost eight to 10 percent but there has been tremendous correction in the midcap stocks. I don’t think that political uncertainty is going to let this market go down beyond a point," he said, adding, "Also, the effects of insolvency and bankruptcy code (IBC), the goods and services tax (GST), the aim to construct toilets, the Jan Dhan Scheme, opening of bank accounts, digitalisation of the economy – it is all a process. I think with every passing day, the benefits of these things to the Indian economy will go up."
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"So, I personally feel that we are in a correction – we had a rise for nearly four years. If the market remains in the range of 10,000 to 11,000 points range for the next one year, I would feel happy,”
On emerging markets outflow, Jhunjhunwala said, "I think the local influence is going to be far greater than the foreign influence. The major amount of foreign money is company specific. Lot of people are invested in HDFC, lot of people are invested in HDFC Bank, lot of people are invested in TCS, so I don’t think that has got anything to do with India, it has got to do with Indian companies."
"So, I for one feel that the flow of the local money first of all will be far better than the foreign outflow and at the moment, India’s macros are much better than the other emerging markets," he said.
On Indian rupee, he said, "I don’t see rupee going to 75-76 to the dollar and there is no reason why it should. We have $400 billion of reserves and we are the most 'investible' country. On all those parameters, I think India is doing well and will do well."
"I am extremely bullish on banks especially those who are in trouble," he said.
On ICICI Bank, he said ICICI Bank carries lot of the characteristics of HDFC Bank with regards to their current account-saving account (CASA) and their retail books. "It is the legacy which is the problem but is going to get over in 2018-2019."
He said, "2018-2019 is also a year of provisions. But there will be growth in profitability. 2019-2020 we will have absolutely clean year, according to me. When nine out of 10 private banks will come back to normalise provisions."
"What excites me most about NCLT is that it will improve credit discipline and integrity in this country," he said, adding, "People are underestimating what the effect of the NCLT is going to be."
Here's is why Rakesh Jhunjhunwala thinks Modi will return to power in 2019.
Read the full transcript here.