So I think on balance market has taken it well.
It's possible that the larger companies then go out and raise $10 billion directly in primary issuance rather than that money coming into the secondary market.
I don't think over the next three, four, five years, you should be thinking I'm going to make this kind of return here.Why we are still okay, is the index constituents haven't participated.
So the larger ones, as I said, the Reliances, the IT, the banks in particular, they haven't participated in this.
And that climax finally when foreigners come in and they have to deploy large money, it typically comes into the top 100 stocks.
"It's almost inevitable that the equity investors from overseas who are waiting for a break in Indian prices never got it, but any dip in this market I think there is a wall of money heading our way," says Manish Chokhani, Director of Enam Holdings.He says it wouldn't be surprising if inflows worth $50-70 billion came to participate in the Indian market given that it has a market cap of $4 trillion.He noted that the index typically triples or quadruples every ten years.Chokhani, however, said it is important to look at investing from a long-term perspective, beyond three to five years, particularly the mid-cap and small-cap segment.No. The markets already voted that they think it now is continuity and while the outcome wasn't what the market expected, I think the market had baked in that there will be at least a simple majority of the ruling party and the National Democratic Alliance (NDA) will come back with 300 plus. So, this lower number of seats certainly spooked everyone and then when the realisation dawned that it's two very senior coalition partners in Chandrababu Naidu and Nitish Kumar who are both probably towards the end of their careers and a little bit more likely to be statesmen like and looking for development of their states rather than what they can extract for themselves or their families, I think the market has calmed down a lot of it.And Chandrababu Naidu was the original CEO-CM who put the whole developmental plank and agenda in front of the country. So I think on balance market has taken it well. Policy continuity looks to be in place. Of course, things will be a little more contentious because the breakup of parliament is now not so one-sided and maybe in its wisdom that's what the Indian public wanted that there are some checks and balances while we still like what has happened, maybe that's what was desired.I don't know, we are reading now post facto but maybe that's what in its wisdom the Indian public seems to have wanted. But doesn't seem to distract from the fact that what was achieved over the last 10 years in terms of fantastic infrastructure development, very great national security, internal security, the great speed and transparency of what was happening on administrative, IT, the digitization of India, the goods and services tax (GST) reform. So a lot of good things have happened and one is expecting the continuation of that to make as I say velocity of doing business in India faster and easier and that's what the market seems to be signalling and the world seems to be expecting from us.No, so two things. On currency, it's a different game because what the West has continued with its printing and even while the central banks signal that they are doing a reversal of quantitative easing, the government balance sheets have started deteriorating because the fiscal balances are going absolutely crazy. So I don't think monetary tightening is happening anywhere in the world and that is what is reflected in commodity inflation or rigidness of inflation which is happening in the world and because the world knows there is a lot of inflow eventually going to come into India, the currency is expected to appreciate and I think we are doing the best to keep it down whereas other currencies in the region have all started again falling. The Indian currency has remained very strong despite as you say some outflow from foreign equity investors because inflows on the debt side are going to be very strong and it's almost inevitable in my view that the equity investors from overseas who are waiting for a break in Indian prices never got it, but any dip in this market I think there is a wall of money heading our way.Bond inclusion has happened in all the indices and I think a series of that will continue and the same way in equity indices also it is almost inevitable that India's weightage starts going up because our index share compared to gross domestic product (GDP) share, I think lots more still like barely sub 2% on the indices and remember markets tend to vote on future profit potential of our economy and the Indian economy at 4 trillion and whatever 5% profit share at 200 billion is not the sum and substance of what India will make.So over the next decade, definitely I expect our currency to be substantially stronger. It has to be a freely traded convertible currency, and moves are already being tried in that direction. But I don't think that day is very far where you'll be able to go out and not say I have to carry a euro and a dollar with me, but hopefully, you could go and do all your buying overseas using Indian rupees.But anyway, that's for later.I was listening also very keenly to the Morgan Stanley folks who have an edge on this. And I was also in Europe the last few weeks. I think the amount of interest in family offices and people with substantial money and even the retail because they have all now heard that India is the next thing. And I do think and I have been saying this for some time now that India will be a repeat of what happened to emerging markets in the 80s when Japan and Taiwan took off and those markets went 10 to 12 times and became a bubble. The same thing happened when China took off and that market also indeed went into a bubble and then has been corrected ever since.The conditions are such that India will create a bubble and maybe retail is smelling it. The institutional investors obviously, have to rotate their money as private equity and so on. Those are the fellows selling. But when you get a wall of money and largely it comes through ETFs and passive flows, they tend to be price agnostic. So as and when this happens I even read Ashish Chauhan saying that the Japanese have launched an ETF. The money then comes, because the wealth in these countries which are earning very low yields and don't see a lot of growth prospects in their economies is very large.So one can't time it but I wouldn't be surprised if you get like $50-70 billion of inflows coming to participate in a market which in the context of a $4 trillion market cap is not something so crazy. But it just creates that final climax.It's an opportunity as well as a fear that the country needs to absorb that kind of capital to use it to grow. So it's possible because a lot of people know this history the way I do. It's possible that the larger companies then go out and raise $10 billion directly in primary issuance rather than that money coming into the secondary market. That itself would also help to create in a sense a real bubble.Secondly, our regulators and the ministry also should be aware of this that you don't - as an investor even I don't want a bubble because you get great returns in a year and then you spend the next 10 or 20 years making nothing. So it's great if it doesn't happen but all I am saying is looking at the conditions and the speed at which this market now works and the way the computers are now programmed and the way the flows are into ETFs and passive price agnostic funds, I don't see how - whenever it happens, if it happens - one will be able to prevent this from happening. The fastest response doesn't typically come from regulators, it comes from the private sector and my belief is the private sector will participate by raising $5-10 billion. It could be for example, it could be a Reliance or an Adani going and doing a $10 billion raise each for one or two of their entities and that could absorb the capital because capital clearly wants to come into India.It's rising top rising bottom so why do you say retail has come at the top?That's actually true what you say that on the day of verdict, maybe the foreigner was very excited that if things go a bit awry we can get invested into India because by and large the country will go on its trajectory and retail didn't give you a chance because that money just quickly came in. So you're right in what you're saying.Therefore, as I say if retail doesn't let up and it doesn't look like it will, the domestic money anyway doesn't have anywhere else to go, it will - domestic as in family offices and so on and the foreigners are very anxious and desirous of coming in. So anytime they see a small break or with some passage of time you see that money coming in and there's only buyers from all three sides and there's no seller, that's what I call the conditions for a bubble to get created, which is why I think it's likely.I hope it doesn't happen because bubbles while they are exciting on the way up, they are devastating on the way down and then the aftermath is very bitter. So I hope it doesn't happen.What's happened is small cap, and big cap have experienced a bubble because some of the prices are just fantastic. I think some of those prices people will not see ten years later. The companies will perform, don't get me wrong. I'm bullish on our economy, I think we get to number three and eventually in this century we will be number one. We will be the largest economy in the world.I also feel there is money to be made in our markets over a decade. We make three to four times on the index every decade, depending on point to point. But if from this point you think on the mid cap, small cap, you have to make money, you have to think of a decade ahead. I don't think over the next three, four, five years, you should be thinking I'm going to make this kind of return here.Why we are still okay, is the index constituents haven't participated. So the larger ones, as I said, the Reliances, the IT, the banks in particular, they haven't participated in this. And that climax finally when foreigners come in and they have to deploy large money, it typically comes into the top 100 stocks. And that's when you finally get the parabolic rise.
