The economy is slowly recovering from the corona pandemic. Veteran investor Rakesh Jhunjhunwala believes that the demand for money is going to increase in the coming times, due to which he is adopting a bullish stance regarding the banking sector, that is, investors can get better returns from banking sector stocks. Big Bull also trusts those banks which are considered to be inefficient banks. In an interview to CNBC TV18, Big Bull Jhunjhunwala said about the performance of the market in 10 years that the Indian stock market has the potential to give bumper profits to investors in the coming years.
Bargaining power of banks will increase, trust on PSU stocks
The cost-income ratio of inefficient banks is very high i.e. such banks have to spend more to earn. However, Jhunjhunwala believes that this ratio will decline. According to Big Bull estimates, this year the nominal GDP will grow at the rate of 14-15 percent and in the coming years its rate can be 10-12 percent. This will increase the demand for money, which will increase the bargaining power of banks. Jhunjhunwala is taking a bullish stance on the entire banking sector, but he is more positive about the old public sector banks as according to Jhunjhunwala, their valuations have been very low and their earnings are expected to increase tremendously.
Jhunjhunwala has confidence in PSU stocks that it can give bumper returns to investors. According to Big Bull, if the government moves in the right direction, then investors can get better returns than this. Jhunjhunwala’s investment is in PSU banks but he is confident that there will be growth in PSU stocks.
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Market positive from last few years’ reforms
The main reason for Big Bull’s bullish stance is the major structural changes that have taken place over the years. According to Jhunjhunwala, all the NPAs went through cycle and work was done regarding Jan Dhan, IBC, RERA and now labor law and agriculture law are being reformed. In such a situation, Big Bull believes that India is on the cusp of prolonged economic growth. He has estimated that corporate profit can reach 5-6 per cent of GDP this year. According to Jhunjhunwala, soon the country can see record capital expenditure.
The corona epidemic has had a bad effect on the economy and the market, but Jhunjhunwala believes that now there is no third wave going to come which will have a negative impact on the market. He believes that the Indian economy is better prepared to deal with any such crisis. However, Jhunjhunwala is confident that the third wave will not come.