Rakesh Jhunjhunwala, partner RARE Enterprises has turned into a hopeful bull amid the outbreak of COVID-19 and feels that money will return to equities on the back of fall in interest rates.
Hopeful bull from a sure bull:
Despite being a long time India bull, now even Jhunjhunwala says that he is feeling frustrated. He has now become a ‘hopeful bull’ from being a ‘sure bull’.
Fall in interest rates will bring back money to market:
There is abundant liquidity in the market. Interest rates in India were falling, but they were not being transmitted. But, the situation is changing fast, suggests Jhunjhnwala.
“We have seen a fall in interest rates for top-level borrowers along with that there is a reduction in the savings rate. So, what is the alternative – money has to come to equities which is a big technical factor to watch,” said Jhunjhunwala.
COVID-19 was blown out of proportion:
COVID-19 created a fear psychosis, but infection & deaths per million in India have been lowest. He defended the decision of the government to implement a lockdown, but still feels that COVID-19 was blown out of all proportions.
People have to live with the virus for now, but the impact of lockdown is unlikely to be as bad as people are expecting.
Reform Measures from Modi Govt:
Jhunjhunwala is of the view that the reforms initiated by the government such as land and labour, but nothing concrete has come out on that front.
Reforms in the Agri sector, as well as mining, are good. But, what we need is some action on land and labour laws and further provide ease of doing business which could help in surpassing China.
Risks which one should watch out for:
Jhunjhunwala highlighted 2 risks for stock markets which could delay the recovery-A) No reforms
B) The occurrence of an abnormally large number of COVID-19 cases