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Samvat 2075: Rakesh Jhunjhunwala says the NBFC crisis is nearing its tail end; expects the sector to do well in future

market | Nov 5, 2018 1:43 PM IST

Samvat 2075: Rakesh Jhunjhunwala says the NBFC crisis is nearing its tail-end; expects the sector to do well in future

Ace investor Rakesh Jhunjhunwala, in an exclusive interview with CNBC-TV18, said the crisis in IL&FS has signified the peak of the non-performing asset cycle. However, he does not see any credit risk in the Indian economy as the NBFC problem is 'nearing its tail-end'.

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"I do not see a reason for fear in the market," Jhunjhunwala, partner at Rare Enterprises said, adding that one should not judge the fundamentals by the stock prices. He is confident that all the non-banking financial companies will repay the commercial papers.
He believes that the NBFCs will not go below the level the sector had seen earlier.  Jhunjhunwala added the housing finance sector is the need of the hour for the economic growth.
Here's what he said on the following:
On markets:
Talking about the Indian market, Jhunjhunwala said the market has been doing well and said 'we have seen a huge rally in the last few years'. He said he has always been bullish on India even though oil and rupee have been the biggest factors for the recent market decline.
The global trade wars, an increase in the US interest rate and the dollar strength are the key risks to the Indian market, he said.
"The rupee has to stabilise between 70 and 75 against the US dollar and we will see a big downward correction in oil, expecting it to stabilise between $65 and $70 per barrel," Jhunjhunwala said.
He said the market has absorbed the foreign institutional investors (FII) selling 'very well'.
On the bond market, Jhunjhunwala said the 10-year bond yield is likely to have peaked and on the stock market, he said that he does not see the Nifty slipping below the 10,000-mark.
On economy: 
Jhunjhunwala said he does not see any credit risk in the Indian economy due to the crisis in the NBFC sector.  "As a country, the need to enhance the availability of funds is towards the housing finance," the investor said.
On the recent spat between the Reserve Bank of India (RBI) and the government, Jhunjhunwala said the government has the right to have a consultative process with the central bank but added that the RBI has the right to take its own decision.
"I do not think the RBI-government issue will precipitate," he said.
On the banking sector:
For the Indian banking sector, which is seeing a continuous rise in NPAs and possibilities of mergers, Jhunjhunwala said that he is a 'big supporter of the consolidation of the banks.'
"The merger of public sector banks is a positive move and it will help save costs," the top investor said.
Jhunjhunwala's stock/sector recommendations:
  • Banks and NBFCs are expected to do well in the future.
  • Insurance, as a sector, can do very well.
  • Some opportunities in banking, NBFC and pharma stocks expected. For pharma, he said the sector is looking 'interesting from a 2-3-year perspective'.
  • He also remains positive on the infra stocks, especially after L&T's second-quarter results.
  • On overall earnings of the companies so far, he said the 'season has not been bad', indicating a positive performance from the companies.
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