Jhunjhunwala says commodity cycle has just begun; steel rally not over
ETMarkets.com
Synopsis
In an interview with CNBC-TV18, the ace investor said India is sitting on one of the highest capex cycles that the country has ever seen.
By ETMarkets.com
NEW DELHI: Ace investor Rakesh Jhunjhunwala said corporate profits would be 5-6 per cent of GDP in FY22 and the structural changes that have taken place in the economy are now coming to the fore.
In an interview with CNBC-TV18, the ace investor said India is sitting on one of the highest capex cycles that the country has ever seen. The billionaire investor said debt in the corporate system at present is significantly low.
“The flow of money in the Indian market is unimaginable,” he said.
He said steel stocks are still trading at 5 times earnings. While people are doubting the moves in steel stocks, he believed the commodity cycle has just begun and would last 5-7 years.
The Big Bull holds over 1 per cent stake in 37 companies, which are worth Rs 19,700 crore at current prices, as per publicly available data with Trendlyne.
The ace investor was last seen buying into stocks such as MCX and Fortis Healthcare in the March quarter even as he trimmed stakes in VIP Industries, Titan and Prakash Pipes, among others.
“Wave or no wave, Indian economy is much better prepared to face any kind of crisis and I for sure will bet my money that there is going to be no third wave. All the smart people on social media are predicting a third wave and we are all getting fearful of that. We should maintain caution and take all care, but I do not think there is going to be a third wave, and even if there is one, the market will take it in its stride, because it is expected," he said.
Earlier on June 18, the Big Bull had told Times Now that India should grow in double digits this year.
“The economy is on fire. Direct tax collections have gone up in the first 75 days of FY22. One must understand that the stock market is a discounting mechanism. India is on the cusp of its biggest and longest growth stories,” Jhunjhunwala said.
In an interview with CNBC-TV18, the ace investor said India is sitting on one of the highest capex cycles that the country has ever seen. The billionaire investor said debt in the corporate system at present is significantly low.
Jhunjhunwala, often referred to as India’s own Warren Buffett, said he is bullish on the so-called inefficient banks.
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He said steel stocks are still trading at 5 times earnings. While people are doubting the moves in steel stocks, he believed the commodity cycle has just begun and would last 5-7 years.
The Big Bull holds over 1 per cent stake in 37 companies, which are worth Rs 19,700 crore at current prices, as per publicly available data with Trendlyne.
The ace investor was last seen buying into stocks such as MCX and Fortis Healthcare in the March quarter even as he trimmed stakes in VIP Industries, Titan and Prakash Pipes, among others.
“Wave or no wave, Indian economy is much better prepared to face any kind of crisis and I for sure will bet my money that there is going to be no third wave. All the smart people on social media are predicting a third wave and we are all getting fearful of that. We should maintain caution and take all care, but I do not think there is going to be a third wave, and even if there is one, the market will take it in its stride, because it is expected," he said.
Earlier on June 18, the Big Bull had told Times Now that India should grow in double digits this year.
“The economy is on fire. Direct tax collections have gone up in the first 75 days of FY22. One must understand that the stock market is a discounting mechanism. India is on the cusp of its biggest and longest growth stories,” Jhunjhunwala said.
Rakesh Jhunjhunwala, a partner at Rare Enterprises and renowned investor, believes that the commodity 'supercycle' has just begun and it can last for the next 5-7 years.
“It has just started and we are in a commodity supercycle for the next 5-7 years. However, forget the supercycle, if you base yourself on last quarter’s prices; today steel prices are 20-25 percent higher than the average realization of last quarter. Companies could see earnings of Rs 200-300 per share,” he reasoned.
The previous week saw metal prices correct after the US Fed's policy commentary. The last five trading sessions have seen the Nifty Metal index slide close to six percent.
China announced intentions to release industrial metals from its national reserves to restrain commodity prices.
“Good cement stocks are valued at 30-40 times earnings, steel stocks are valued at 5-7 times earnings and people are doubting it. I am not talking about today’s prices, I am talking about last quarter prices. Everybody knows that cement stocks are going to prosper and steel prices are going to come down and they are not going to last; until there is doubt the prices are just going to go up. I am not bullish but extremely bullish on metal stocks both from earnings and valuation point of view,” said Jhunjhunwala.
Global brokerage Jefferies has a similar point of view and maintains a buy call on Tata Steel with the target at Rs 1,500 per share.
“Tata Steel’s FY21 annual report shows a rising focus on sustainability and also sets out specific targets for 2025/2030. India capacity expansion is a key strategic focus with the company working on separating the UK and Netherlands businesses,” Jefferies has noted.
Jhunjhunwala also gave a disclaimer, which is important to note here.
"I want to make a disclosure that I am an interested party and everything I say, please take it with a pinch of salt," he said.
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