Hemendra Kothari, chairman of DSP BlackRock Investment Managers, one of India’s leading investment bankers, is considered an elder statesman of the investor community. Here, he tells HT why he is so bullish about the future and the government of Prime Minister Narendra Modi.
You have said that you won’t be shocked if the Sensex touches 30,000 in one year. Why?
I expect we’ll return to a much higher growth trajectory in manufacturing, power and service sectors over the next year. Narendrabhai Modi has mentioned that kickstarting industrial activity to create 10-15 million jobs a year will be his priority.
His record as chief minister of Gujarat gives us hope that he will be able to turn things around. His biggest advantage is that he will be the first Prime Minister in 25 years to command a majority in Parliament. This will enable him to take quick decisions, empower bureaucrats and encourage investments.
I strongly feel that we are at the start of a long-term, multi-year bull run. Of course, there will be corrections from time to time but the general direction of the market will be up.
The Sensex has been scaling new peaks at a time when fundamentals look weak. Is the optimism justified?
Markets look at tomorrow… I expect earnings growth of Indian companies to follow an upward trajectory from here on. But if you look at funds flows, you will see that many large global funds have ignored India. Have we received as much money as China? No. Much more money will flow into India if proper policies are announced and implemented
The Sensex has been scaling new peaks at a time when fundamentals look weak. Is the optimism justified?
Markets look at tomorrow… I expect earnings growth of Indian companies to follow an upward trajectory from here on. But if you look at funds flows, you will see that many large global funds have ignored India. Have we received as much money as China? No. Much more money will flow into India if proper policies are announced and implemented
By when do you see industrial activity picking up?
It will take at least six months for activity to pick up on the ground. Demand has to be generated. We need strategic investments in infrastructure and manufacturing. Capex growth in 2013-14 was 2.3%. It shows industrialists were not prepared to invest. The first objective will be to motivate investment and create an atmosphere where Indian and foreign institutional and corporate investors come forward. I expect GDP to grow at 5.5-5.75% this year. Next year, it could, with the right policy inputs, rise to 7% and go further up the following year.
What are the five concrete steps you would like the new government to take immediately to revive the investment cycle?
The new government has to create a buzz about India. The first thing the new government has to resolve is the uncertainty in the minds of investors about retrospective taxation. A clear message should go out that laws will not be changed with retrospective effect.
Then, it should take steps to immediately clear the more than $140 billion (Rs 8.4 lakh crore) projects that are stuck in the mining, power and infrastructure sectors. This will have a massive multiplier effect on the economy.
We have to be competitive in the global markets. The rupee below 60/dollar can make Indian exports uncompetitive. RBI governor Raghuram Rajan is looking very closely at that. Controlling inflation should be a priority. For this, supply side problems in perishable commodities like food have to be resolved.
Then, we require hundreds of new cities to come up. Small towns have to expand. Heavy capex on railways, particularly new lines connecting India’s mining hubs in Odisha, Jharkhand and Chhattisgarh can make a huge difference.