Edward Pulling, Fund Manager at JP Morgan AMC managing $6 billion (Rs. 29,100 cr) in India, said that when he first started investing in India, about 15-16 years ago, the Sensex was around 3000-4000 and now we are at 14,000-15000. And according to him in 3-4 years time market will be at 30,000. So by almost any measurement that is a bull market. This being India, there are going to be plenty of bumps along the road and that is part of the fun and challenge of investing in Emerging Markets. But there is tremendous amount of money, profit to be made in the longer-term if you stick with it and you know what you are doing. If I think that the market can double from here in 3-4 years then that is no matter what your definition is that is a bull market. But it's not going to be a linear 14-15000 to 30000.
What happened last year -was that there was too much exuberance going into 2008 and no one could have predicted those events.
Where are we right now -14,200 on the Sensex; in March 2009 EPS is going to come in at around Rs 850 and once the earnings upgrades kick, you will see March 2011 EPS at around a Rs 1000.
So over a 30-month period I think earnings can double. Why?- A lot of capital intensive long gestation projects, ports, roads, steel mills, airports, etc. all these big ticket items which are under construction right now, are still finalizing their linkages, power stations etc, these will start to come on around 2012 or through 2014-15. They will change the complexion of earnings in India. But it is important that they all start coming on towards those three years. Then of course you will also have quite strong growth from financial services sector. I can't guarantee that in March 2013 the denominators double, it could be September but you will see a significant ramp up in earnings.
Commenting on the Indian economy, Pulling said he was positive that India would once again see a GDP growth of 7% and 8%. He said that earnings growth would be primarily driven by the infrastructure space.
However, he said that the Indian real estate sector was not attractive right now as there was more transparency required.
He said that the market will trade back to its long-term average multiple of 14-15 times forward earnings. Also market is not over extended right now, in valuation terms and it will really ramp north from 2011 to 2013.--~--~---------~--~----~------------~-------~--~----~
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