India is a strong long-term bet, but only if policy and economic support comes in. That’s the word from Rajeev Bhaman of Oppenheimer Funds. He believes that the Indian stock market can double over the next five years if government provides policy support.
Speaking to Shereen Bhan as part of CNBC-TV18’s special series The New Yorkers, Bhaman says that the indices do not necessarily show a full picture of what’s happening with the India story, since most of the euphoria is in a small group of stocks.
On specific sectors, he is betting big on real estate, private banks, auto and pharma.
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Below is the verbatim transcript of the interview.
Q: What is your take on the Indian stock market?
A: You must look at India on a 10 year type basis. I think the stock markets response is an over response to a near term circumstance but to a long term circumstance it is not.
Q: In the near term you believe the euphoria has been over done?
A: The euphoria has been seen only in a small group of stocks. I don’t think we actually have seen euphoria in the broader market. If you look at the broader market it hasn’t really shown up that way. There needs to be a lot done to demonstrate that the India that we expect to happen post this election is likely to happen in the timeframe that the stock market tends to typically discount.
Somebody was pointing out to me yesterday that what we have seen in India is the same old stuff do really well. It is the consumer stocks, it is the sort of popular things that have done really well. The cyclical broader market sorts of things haven’t. So, the index actually does not represent the market as a whole, it is a very narrowly grouped bunch of companies that have done well and the rest of the places sort of did well and then its come back.
So, for instance yesterday after the news from the Supreme Court around the coal blocks being de-allocated lots of things got wacked, banks got wacked, the companies that were allocated the coal blocks got wacked. If you look at those sorts of companies infrastructure companies, somewhat highly indebted companies who were betting on infrastructure growth they haven’t done anything at all. In fact they are close to 5 year lows or at 5 year lows. So, there has been a mixed bag there.
I am quite optimistic about India. Structurally I think there is an opportunity which may be is a once in a decade type opportunity to actually fix a few things but a lot of stiff does need to be done. There is a show me the money aspect that I think the market will demand. Right now the safer thing to do is sort of buy the things that you were buying whenever you were buying them which is over the last 5 or 10 years the big consumer companies, IT companies and so on, things that are not really dependent on India working. Many of them are not really dependent on India working some of them are dependent on the agricultural markets working well which clearly is improved agricultural income for Indian farmers and so on.
It is a mixed bag as it is always. I think the US is further along in its recovery process than many other parts of the world. I think the emerging markets again are a mixed bag. We have a very confused very difficult circumstance in Russia, we have difficult political environment in Brazil so both those markets I think have the same sort of expectations in terms of hopefully things will change for the better. There is an election coming in Brazil and so the expectation of change is similar to the expectation of change that was there before the last election in India. India we have sort of resolved things in the right direction. So, the optimism is perhaps justified on one level.
As far as China is concerned there has been a tighter control over Chinese growth than people might have expected because the world has seen something different for the last decade and a half. So, I do not know for sure that the emerging markets are in a better position, in fact I would say that it is mixed and rest of the world is also mixed. Europe is still undergoing a fairly difficult transition process out of a very bad circumstance but they have structural problems that go beyond the current moment and there needs to be a lot of things resolved in Europe that will take time.