Long term secular bull market


Well-Known Member
Today, we think Nifty is expensive. But the reality is that India is at the cusp of a long term secular bull market, based on solid foundations.

Obviously, the most important thing to sustain a bull market is earnings growth. And Indian equities will see earnings growth at a level that will DOUBLE Nifty earnings in the next 24-36 months! It may come as a shock to you, but let me explain why this is the case.

In the next 24-36 months, we will see impact of GST, monsoon, Seventh Pay Commission, lowering of interest rates, etc playing out fully.

Reliance will have massive projects producing revenues and profits. Already Reliance Retail is breaking even, once e-commerce also kicks in, it will be able to increase profits. Jio will be making huge inroads by then. And both will expand the market significantly.

Banks will obviously have worked through all the bad loan issues, and they will be in a position to start recovering money not just from current bad loans but also loans made years ago which are already written off. That money will straight go to the bottom line. Also Banks will monetize their stakes in insurance, asset management and other ventures.

Commodity prices are unlikely to remain soft for too long, and we could see big gains in profitability of the commodity and mining companies.

GST will have huge profit boosting impact on Cement and Automobiles - because they may not pass on all the benefits to the consumer.

Pharmaceuticals sector is currently suffering from a lot of problems related to quality, US inspections, etc, but over 24-36 months they have no choice but to sort out these issues. And they anyway know that they cannot escape - so better to clean up their act. In fact this process is already significantly under way.

IT is going to see a massive boost from domestic projects kicking off in a big way - both government as well as private. This should hopefully compensate for pressure from overseas engagements. In any case, IT has seen the writing on the wall, and they are already investing in automation, and other productivity enhancing methods. This will increase profitability even at lower billing rates.

Government revenues will get a huge boost with this spurt in corporate earnings as well as the resultant increase in direct and indirect tax incomes from people.

This will allow kicking off infrastructure projects and making sure that they have adequate funds. This process has already started, and will accelerate significantly.

Literally, I can only see the pure telecom plays in the Nifty being the laggards - because many of them will see drop in ARPU. But the massive shift from voice to data, and the fact that data costs will keep dropping, should give some relief.

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