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Bull run is getting bigger! There are 70 million bulls in the market now, says Raamdeo Agrawal


After a big run we will have a consolidation or maybe some correction for some time. It is not necessary that from one Diwali to next, if one makes 50%, it will be another 20-25% in next Diwali. That is not a given, says Raamdeo Agrawal, Chairman, .

After a year of re-rating, solid price action, earnings comeback and recovery, what is in store for us? Bulls are back but are they here to stay?
Not only are bulls back, I think many more bulls are coming in. That is the biggest change this time. It is not the same number of bulls who are going to play in the market. In 2007-2008, there were just about 10 million bulls. In 2012-2013, there were 20 million. By 2021, there are 70 million bulls! I am talking about the Indian bulls and my sense is that in the next three years, it will be anything between 150 and 200 million bulls. So you can decide how big the bull run is going to be here!

Bull runs ultimately are a reflection of the economy which gets captured in earnings. So while earnings recovery and earnings trajectory are headed in the right direction, valuations are way above the historical averages. If the inflationary environment comes back and interest rates go higher, value stocks will start coming down.
It is quite possible that after a big run we will have a consolidation or maybe some correction for some time. It is not necessary that from one Diwali to other Diwali, you made 50% and so next Diwali has to be another 20-25%. That is not a given. Maybe it is flat, maybe it is a little over. There are so many IPOs.



Incrementally there will be that virtuous circle from stock market to the real economy, real economy to demand revival and things like that. So, the market can take a breather and that will be very good as other people will come in and corporates get the money. Some people are getting more than what they should get and valuations are quite stretched. So let the market stop here in terms of run and let the primary market take what it can take and let the valuations there become reasonable and let the earnings also catch up. But the bull run is not about 6 months, 12 months, 18 months. My sense is this run is going to be a much longer run. If we do not get too high too quickly, then this run has steam for a much longer run.

For next two to three years, let us divide the market in three pockets; where do you think markets are likely to give low returns? Where the markets are likely to give no returns or negative returns and which end of the market is still capable of giving parabolic returns?
It depends on a lot of external factors. The economy still has to recover. The slowing economy and Covid had given a kind of fatal blow to the financial sector books. All the books can be provided for and a new credit cycle is going to start. My view is that the entire financial sector — be it NBFCs, banks or even insurance companies, all the intermediaries — are going to have a much better time in the next two-three years.

In any case, IT and other sectors are also doing very well. It is going to be a good mix. The real estate sector has not been participating in the market after 2008. Now real estate is in a new cycle thanks to low interest rates and massive liquidity. How that can boost real estate which in turn will boost tile companies, cement companies, steel companies and contracting companies, I think it is going to spread out.

We have to buy reasonably good companies at reasonable prices. So buying a great company at a reasonable price is the whole idea. It is very difficult to chart out the next three-four years. We have to see what the government policies are and where exactly the government is going to be comfortable because we have seen a lot of disruptions in the last five-six years.

But if there is any other disruption coming in from the government side in the next two-three years, then the story could be very different, but otherwise, in natural course the economy will recover.



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