Maverick Indian investor Rakesh Jhunjhunwala believes bold reforms such as opening up the country's insurance and pensions to foreigners will be critical to quell concerns about the market being pricey and sustain a stock market rally. Expectations for economic reforms in India have gathered momentum after the ruling coalition was re-elected with more seats in parliament nearly two weeks ago.
-- Insurance, pension reforms needed to boost fund inflows
-- Banking, retail, infrastructure, pharma to see growth
-- BSE index may hit 15,500 points by end-Dec; 12,500 is support
"Insurance, pension reforms are going to be extremely important for the stock market because the kind of money we'll get from that is unbelievable," Jhunjhunwala, dubbed by the media as India's Warren Buffett, told Reuters in an interview.
The main stock index, which has jumped 16 percent since the election victory, taking gains to three-quarters from a 2009 low in early March, could rise another 10 percent to 15,500 by the end of December, he said. "It is very much contingent on factors. One is how things pan out internationally and the second is how well the government meets expectations," he said, sitting in his plush 15th-floor office overlooking Mumbai's financial district.
"If both turn into favour, then I don't think valuations are expensive," he said, adding 12,500 would be the base for the index. Jhunjhunwala, who started more than two decades ago with about $100 and whose wealth was pegged at $1 billion last year by Forbes magazine, said infrastructure-related sectors, banking and retail could prosper with a stable government in office.
Entertainment could also prove to be a growth area, while drugmakers offered good opportunity. "I think the Indian cost benefit and research benefit is extremely high. I am very bullish on the sector," he said, referring to pharmaceuticals.
He was wary on the outsourcing sector amid the US recession and weak dollar, but said it was important for India's economy. "If software exports grow 10 to 15 percent and commodity prices hold at these levels or slightly below, I see no reason why India will not grow 10 to 11 percent in two years," said Jhunjhunwala, a heavy smoker who relishes Blue Label whiskey.
He also said the proposed merger between leading Indian mobile operator Bharti Airtel and South Africa's MTN would add value to shareholders of the two firms. Bharti's balance sheet and cash flow showed that its interest cover was good and the deal posed minimum risk to the company, which is planning to raise about $4 billion in debt, he said.
The father of a five-year-old girl and 2-1/2-month-old twin boys, Jhunjhunwala also trades in commodities, debt and currency but his biggest exposure is in stocks and his office features a painting of the Bombay Stock Exchange. "I have far less than what people think, but far more than I need," the bespectacled investor said.
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