The current set-up of the Indian stock market has the makings of a long-term bull market, like the one seen during 2003-07, says Gautam Baid of Complete Circle PMS.
In an interview with CNBC-TV18, Baid said every new bull market has three stages and we are now in the stage one.
“Every new bull market has three stages. In the first stage, stocks across board and across sectors get revalued. In the second stage, we see a narrow and selective rally where stocks with good earnings visibility do very well. Finally, in the third stage, there is widespread euphoria wherein junk stocks go parabolic and then the bull market comes to an end,” Baid said.
He added that we were in stage 1 of the bull market. In India the bull market which started a few months ago has all the elements of a sustained multi-year bull market, he added.
Also Read: Reliance-JFSL demerger: What is the new demerged Jio Financial Services — explained
Further, the fund manager believes that the Electronic Manufacturing Services (EMS) industry is showing classic bull market sector leadership signs.
He expects the entire EMS industry is expected to grow at 25% for the next 3-5 years, while the leading players in the industry may grow at a faster rate than consensus estimates.
Speaking on Jio Financial Services, he said that the demerger of JFSL from RIL will give birth to a financial behemoth in the country, thanks to its 6.1% holding in Reliance treasury shares.
“JFSL by virtue of its 6.1% holding in Reliance treasury shares and its other assets will start with a net worth of almost ₹1.5 lakh crore. Generally, NBFCs lever up to 6-8 times their book value. Bajaj Finance with ₹44,000 crore of net worth has an AUM (assets under management) of around ₹2.7 lakh crore. We can just do the simple math and see how big a behemoth can Jio Financial become,” Baid told the channel.
He is of the view that JFSL will have a great advantage of low cost of funds and it can leverage on the existing huge subscriber base of Jio Telecom and Reliance Retail.
“However, every good lender in India has to go through one down cycle and it has to be tested in the down cycle and that is when to know the true quality of the lender,” Baid said.
The fund manager remains very bullish on the entire lending ecosystem. He expects net interest margins (NIMs) may normalise.
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Updated: 20 Jul 2023, 03:24 PM IST