Q: We are now in the fifth phase of the lockdown and are now starting to see most states as well as the Centre looking at reopening the economy. The markets have also seesawed through this period. How have you traversed or navigated this lockdown period?

A: First I would like to say, you should remember that when Sushmita Sen won the Miss Universe title, she said that change is only constant. So I can only say at the moment that uncertainty is the only certainty. I want to qualify this before I say anything.

Having said that, I think COVID-19 has been made to be – it has created a fear psychosis in everybody’s mind. After all, it is a flu. We are 137 crore Indians. All of us have flu at least 7 days a year on average. So we have 950 crore days of flu in India. If you divide that by 360, 25 lakh Indians have flu every day. If you divide that by 7, that means nearly 3.5 lakh Indians get flu every day, and on an average 3.5 lakh are cured. This is, after all, a flu. What distinguishes it is that it is infectious and for those who have co-morbidities or are old, it could be mortal.

Having said that, India has in relation to its population, a very small population of infection per million and the death rate is the lowest. So the lockdown was very necessary to create the infrastructure needed to treat this flu and remember one thing that this is a flu, nothing else, it is not the plague. Most people will get cured even if they are not treated. Therefore, what I want to say is that we have blown this out of proportion.

The fact remains that we know that flights crash, we know that there are car accidents but don’t we fly, don’t we take by car? So we will have to accept this, create the health infrastructure and move on. That is my point of view.

The death ratio is very low and after all 25 lakh Indians suffer flu every day on an average. So it is very good that the government made a very timely intervention with the lockdown but it has passed us. Now we have to look forward to opening the economy, taking the necessary precautions, creating the infrastructure and moving on.

Q: I agree with you that the need of the hour is to restart and reopen but what do you make of the impact of the lockdown itself on the economy?

A: I don’t think it is going to be as bad as people are making out it to be. Everybody, including the press, has played a role in this worldwide. A fear psychosis has been created in everybody’s mind. So nobody can think positive, anything anybody can think is negative.

The impact of the slowdown – tell me, how many jobs by percentage have been lost in the organised sector? There is no question that the GDP will be negative this year. But I am telling you one thing that if I had listened to economists in my life, I would have never made money in the stock market.

So the effect is there, the agrarian economy is not going to be affected, the service economy is going to be affected, no question about it but once things improve, the economy will come back with a bang. And if this leads to reforms — what India needs for prosperity is just ease of doing business. If that can be created in India, the COVID-19 crisis is not going to matter in my opinion.

But as Indians — I am not blaming the politicians, bureaucrats or businessmen, I am blaming all Indians. We as a society are not able to take the decisions which will create ease of doing businesses and hasten prosperity in this country. It is needed and if we can do that, it could again be a 1991 movement for India.

Q: You talk about the 1991 moment, but let me ask you, on the back of what is already been announced, the package announced by the government, the reform measures announced by the government, the opening up of sectors, reforming the APMC Act, the Essential Commodities Act, do you believe that many of these measures have the potential to be able to provide the kind of trigger that the market is hoping for to ensure that the underperformance that we are now playing catch up with, will be sustained in the long term, the momentum that is being built up in the last few weeks will be sustainable?

A: The Prime Minister talked about land and labour but nothing has been done concrete in the matter of land and labour. Where I think our government is ready to act and announce is in the PSU disinvestment. I think it will be very positive. The agricultural reforms they have done will change the face of Indian agriculture. The reforms on mining are really good. What we need is some action on the matter of land and labour laws and further ease of doing business.

And why should have this attitude of: we will get manufacturing if it comes from China? We have to build conditions where we are better than any country in the world for foreigners to invest in. Let us look at it that way, why do you have to look at it in a negative way that because China will not get business, we should get it. We should get business, we should be better than China. If COVID-19 results in reforms in this country, I think there could not have been a more positive outcome.

Q: I agree with you on China that we must stop boxing ourselves into this race against China. We need to ensure that we get our act together to get the funds coming in irrespective of what China does or China does not do. I agree with you there.

A: We as a society have to reexamine why this is happening. We have the skill. Tim Cook says that he takes manufacturing to China because Chinese software programmers are skilled. I cannot believe that Indian software programmers are not skilled. So the question is why we as a society are not able to [make the leap] despite having all the potential. And despite being an India bull, I am also now feeling frustrated that if we do not do it now, when will we do it?

Q: That is a big statement that you are making – you are saying despite being a long term India bull, today you feel frustrated; what are you frustrated with?

A: Why don’t we amend the labour laws? Three states amended the labour laws. Then the union labour ministry comes out with some new facts. This is not how we should treat it. We have to take difficult political decisions without that this country cannot achieve prosperity. With this kind of majority which government will do it other than this?

You may able to give food and I have absolute sympathy for migrant labour and the poor who have lost their jobs but this is giving them fish. The only way we can teach them to fish is by creating prosperity, by having growth and for that – I may sound like a lecturer here but — the only way to do it is by reforming and creating ease of doing business.

People are underestimating that if you create ease of doing business in India what kind of prosperity this country can have. I think 10 percent growth is then nothing.

Q: We are very far from that number at this point in time but let me ask you about what you are seeing — and it is not just playing out in India, it is playing out globally — this disconnect between the market and the macro. How do you see that impacting the way that markets are going to perform going forward, both global as well as India?

A: The first effect is the emergence of liquidity. I have never seen such a fall in effective transmitted interest rates. Interest rates in India were falling but were not being transmitted. This time at least the top-level borrowers, there has been a real fall in interest rate, there is a real reduction in the savings rates, in the deposit rates. So, what is the alternative you have today?

State Bank of India is offering 3 percent, 3.5 percent for one year deposit. So money has to come to equities; I think that is one very big technical factor.

Second, I will value a stock at its long term earning potential. But tell me one thing, XYZ stock whether it earns Rs 1,000 crore or Rs 1,200 crore this year, whether the economy in June or in April [next year], I only want to know will it survive, will it have enough resources to be able to grow next year? So, therefore there is no question; if it has resources, the market is looking at its long term growth prospects.

If you look at the market, smallcaps were in a bear market from January 2018. Now with this event, the largecaps joined in and typically before the start of a bull market you have a severe fall which shakes out everybody. In 2001, September 11 was that event and the index breached the level which was never seen again in history. You had a bear market which started in 2018, just as the one which started in 1999 or 2000. Then you had this severe fall because of COVID-19, and now on the first rise after the fall, nobody believes it. Everybody gives a buy call only because they are forced to seeing the prices. So, I am hopeful, I remain the eternal bull, and I am hopeful this may be the start of what could be a very long bull market. I have been wrong earlier and I could be wrong now.

Q: You brought up interest rates and you are right, we have seen transmission take place. But what do you make of the financial sector because that is where there is a lot of concern on what the COVID crisis as well as the slowdown, which was before the COVID crisis is going to mean as far as financials are concerned. What will it mean for bank balance sheets, what will it mean for NBFCs which continue to struggle, from the March lowest the Bank Nifty has recovered but not that much, what is your take?

A: The markets do not like uncertainty. Now as I told you the only certainty is uncertainty, but the uncertainty in the banking sector is far more than in the other sectors. Having said that, I think if you look at Mr Aadesh Gupta’s report of Credit Suisse, the earnings decline in most of the private sector banks for the first 21 days [of the lockdown] was just 4-5 percent. But the price which analysts are asking us is half or one-third. That is because of uncertainty. But do not forget one thing if you are bullish in India you cannot have growth without industry, without banks.

I think post COVID-19, and after normalcy returns, it is only banks, which will have the liability franchise. So I think it will take time, I don’t think you will see substantial recovery in the financial sector before November and December when clarity for the amount of default which comes out of this moratorium is clear. But I think at these levels it is surely – I think it is an investible sector.

Q: You still believe it is investible?

A: It is an investible sector. Another thing, which is very significant I think is not being pointed out. The FII ownership in the Nifty 500 has halved in the last 3 years. From 40-45 percent, it has come down to 23 percent. So therefore if we do things well, FII can come. They are right now being disillusioned that in the last 4-5 years, the market has gone nowhere. They were making money these financials and with the fall of the financials, whatever money they were making also has been wiped out.

So naturally that produces a very negative thought process for FIIs. So if we perform well I think not only local, a lot of international money will come. And today also, the differential interest rate compared to the world is very large in India. So technically I think the market is poised.

Q: You believe that we are likely to see return of the FIIs as well?

A: If we perform earnings-wise, surely it will come. There is unprecedented liquidity in the world. It is unimaginable. 3-5 times of 2008. So unless we have inflation, interest rates worldwide are going to [remain low]. And as long as the needle on the S&P 500 is greater than the 10 Year bond, money will flow into equities.

Q: What about metals and what is the outlook there? We are also seeing a lot of policy decisions. We have seen sort of opening up of commercial mining, which has been long pending, once again back on the table, what is the outlook there specifically?

A: I think the outlook is good. The way the stocks had been beaten down, it was as if there is no tomorrow. I personally think some of the most profitable investments will be those which are made in the most beaten-down stocks. What you only have to see is will they survive, can they withstand the losses which will be incurred. I think if they survive, the most profitable investments will be in the most beaten-down stocks. Metals are among them.

Q: You believe that they have been beaten down the most or are amongst the sectors that have beaten down the most and you believe that could see a turnaround as well. Where do you see the most vulnerabilities? Outside the banking sector for instance where there are obvious vulnerabilities, where do you worry about an existential issue and irreversible damage or dislocation? Hospitality, tourism, aviation what is your outlook?

A: I think aviation will take time to come back. And I have concluded one thing – let us not forget Warren Buffett’s original statement that you want to become a millionaire, become a billionaire and buy an airline. So I think it is best we keep away.

Q: So keep away from aviation, but what about the other sectors that are seeing a massive dislocation today because of COVID?

A: I think hotels will come back. There are industries which were in a depression for the last 5-6 years. I think this fall or the current circumstance is the climax for them. I include construction and hotels in that. I don’t think it will get worse than this. So I would stay away from aviation but construction and hotels, I think will come back and restaurants will also come back. I need to go to Golden Dragon and eat, ordering from Golden Dragon does not satisfy me.

Q: For the sake of restaurants, I hope there are many more who think that way, now that restaurants are going to be allowed to reopen at least in some parts of the country starting the June 8.

A: One thing I can tell you, consumption has taken hit in this year, but other consumption will be there in essentials. I think there could be some bump up in purchase of cars and vehicles for transport. In general, I am not as bearish and as concerned as everybody else. I mean such a fear psychosis has been created that people just cannot think anything but negative and fright. Things will turn out better than expected is what I feel.

Q: You believe that it is going to get better. But I want to stay with the consumption theme for a little bit longer and you are absolutely right that there is this fear psychosis and one is still trying to understand how this is going to play out as far as consumer behaviour is concerned. FMCG, what we are seeing at this point in time is staples continue to move ahead but there is likely to be downtrading or at least there are already indications of that, how do you see this from different sectoral perspectives on this change, how are you reading this?

A: I am not concerned. There may be negative growth this year, there may be some fall in consumption but if you take the right decisions, I think next year there will be 15 percent growth. So consumption will come back. I say what is this matter of one year?

Mr Rahul Bajaj says what is two years in a life of a company? So why should I speculate whether the FMCG consumption will go down. If the company will survive, they will do very well. I cannot predict whether the FMCG consumption will go down, whether people will drink [less or more] Coke this year. I know they will drink liquor and cigarette, that I am sure.

So the question is that all this speculation, we cannot predict but I think consumption will be in general, things will be turn out to be more optimistic than what people are estimating. I am concerned about the lockdown. If my company can survive this lockdown, with the interest rates being what they are going to be, then I think I am happy.

Q: The speculation on the near-term is perhaps overdone but for the long-term, we have now seen this stimulus package being announced by the government. Support more than stimulus. Majority of that package is loans and guarantees. We have also seen decisions being taken by the Reserve Bank of India (RBI) and of course interest rates you have already pointed out. We could expect more. There is the possibility of one-time restructuring etc as well. What is it that you would now like to see in terms of next steps, when you talk about the context of reforms and you talk about the long-term story both from the RBI as well as from the government, what is the next steps you expect?

A: I think the RBI should allow one-time restructuring. That is very important. Government has to amend land acquisition and labour laws, government has to disinvest the public sector, it has to ensure ease of entering business. Government has to do everything with ease of doing business and ensure that what the Cabinet decides is implemented and not watered down. The cabinet decides one thing, by the time it comes on paper, it is something else. So I want reforms on the government and one-time restructuring from the RBI. And stimulus, I think government will give after seeing the implication. I am not the best man to judge how the stimulus should be given. But I think – the stimulus can be given with long-term benefits and can create jobs by investment in infrastructure.

Also, I feel that if we play our cards well and if we act properly, the kind of money we can attract is unbelievable. And I see no reason why we should not borrow money from abroad. I think we give too much importance to credit rating agencies. Instead of announcing fiscal measures, government can make a COVID budget which it can say that it will wind it down over the next three-four years. It can increase spending. I think they must do that. The last part of the spending should be directed towards infrastructure spending.

Q: That is the hope that it will be driven by government spending on infrastructure if we want to restart the economy in earnest and that is the big bet at this point in time.

A: I feel that the government should act in the way Modiji acted when he got Tata Motors into Gujarat and gave them 100 acres of land overnight. So government has to create laws. My dream is that if you create the right atmosphere and the right laws, where this country can go, nobody can explain. But all political decisions are so difficult and there are so many vested interests, we have to overcome them and we have to overcome them for poor because the biggest gainer will be the poor.

In the telecom revolution, the biggest beneficiary is my help. He stays for 11 months with me, his children are in Bihar. He could barely speak to his children 10 years ago. Now everyday, he does video calling. So I think bringing prosperity is the only gateway to solving the problems of the poor.

As a society, we should be ready to take far greater risks in order to ensure growth. Unless we are ready to take those risks, we cannot have growth. We go into the shell that this decision will cause this. We have to take the risk, we have no choice. We cannot maintain status quo.

Q: So you continue to live as if there has been no lockdown. But I want to ask you about what are the global factors and the global triggers that you are going to be watching out for? Liquidity clearly in abundance and we are seeing whether it is the Fed or other central banks doing their bit to provide the much-needed stimulus but given where global growth is, given how central banks are performing, what is it that you will be watching out for in terms of global triggers?

A: In China and in Korea – after they opened up, there is no recurrence of COVID. Slowly, the western world is also opening up. What would happen in America and Europe, if there is a big recurrence of COVID, that could be disturbing. I don’t think there will be but I don’t rule it out. We will have to wait and watch.

Q: Given the fact that you believe that this could be the start of another very strong bull market, in the near term what are the risks specifically for India that you foresee even though you are bullish on the long term?

A: I think the key risk is no reform. Second, the recurrence of a very abnormally large increase in the number of cases. I do not see any third risk. If we do not seize this opportunity and we do not reform, I think that is a risk and the status quo is going to remain and we will have to move at 5-7 percent rate. Second thing is that if we have a very big increase in the number of cases, that could be a risk. But that could delay things, it cannot end things.

Q: If we continue to see this sort of protracted reopening, and what we are seeing is that the center announces something, state governments are still worried or are more conservative to open up and there is confusion. Today for instance we once again have seen state borders being sealed by various district authorities. If this reopening is going to be long-drawn and protracted, what do you believe the impact is likely to be especially on corporate earnings?

A: My estimate is that after June 30, everything will open. This month, it will differ from state to state. I think Mumbai which is worst state will also open up after June 30 because the containment zones in Mumbai have become half in the last month.

I am not very much concerned about corporate earnings in this year. Why should I be concerned? Is it going to matter? As long as they can survive and they have ability to grow next year, I am not concerned what the earnings are.

I am not going to be able to predict it and I am not concerned. I know if the company will survive — India is going to grow in my opinion — and then the company is going to make profit over long term. So, all this emphasis on what this company will earn and all that, I do not think is so important.

Q: You talked about disinvestment and that has been a big theme that you have been pushing. Given the fact that the government has come out and said that it is going to draw up a list of strategic sectors, non-strategic sectors. In non-strategic sectors, they are going to try and bring down the number of public sector companies, etc. We are still awaiting details and clarity on this but this is been a long drawn process — for the last few years, it has been underway. So, how are you reading this whole disinvestment theme as we move forward?

A: I do not want to read into anything government says before it acts. The government announces so many things and it does not act later. So let us see how they act. Let us see the putting of the words into action. If they do it, they will be the biggest gainers, this country will be the biggest gainer.

If you have a coherent disinvestment policy, I think every public sector stock in general will double in price. The biggest problem is we have no coherent disinvestment policy. You say every year I will sell LIC, LIC is not going to get its value. So, there is no coherent disinvestment policy and you are having inefficiencies of the public sector continue. So, if government disinvests, the kind of gain this country can have is unbelievable.

But now I will believe what they do, not what they say. Look at the labour laws, 3 BJP state governments amended the labour law and then the central government says not allowed. Did they not consult the central government before that?

I am hopeful that we can take actions, which can lead us to 8-10-12 percent growth. Even if we take some action and it will lead us to 5-6 percent, stock market may be in a bull market, but we will not be realizing our full potential. I as an Indian want to see the society take decisions by which we can realize our full potential.

What is stopping us and ultimate prosperity is only ourselves. All of us. Let us not blame each other. Unless we take those decisions, we will remain at 5-6-7 percent and we will never go to the kind of growth China is seeing. Once we take those decisions, I think we will surpass China’s growth story.