On next 10 years growth: The last 10 years have been revolutionary as the economy has grown quite significantly and a lot of wealth has been made despite the volatility. My view is the next 10 years are going to be equally good or far better. Just to give you a perspective, in last 10 years, the economy grew from a $1 trillion to $2.5 trillion. In the next 10 years, this $2.5 trillion can easily be $6 to $7 trillion. A lot of wealth is going to be created.
Market growth expectation: The base effect would come into play if we reach a very large size but in the last 70 years, we have reached $2.5 trillion in economy size. Look at other countries which have witnessed fast growth over the last 30-40 years like Japan, Taiwan, Korea, even China. When fast growth starts to happen in an economy that rapid growth stays for 25-30 years. India has been in that phase only for 10 years and so it is very fair to presume that this era of fast growth of 7%-8% should continue for the next 10-15 years. In terms of expectations, the GDP should move up from $2.5 trillion to $6 trillion or $7 trillion. Typically the markets follow the GDP trend. So if the GDP is going to be 2.5 times of where it is today, it is logical to expect that the market should also logically be 2.5 times of what it is today in the next 10 years.
On Financials space: In a growing economy, financials will continue to be the largest component of the economy or the GDP and in India it would be no different. However, having said that, we will have two types of financials -- one would be the fund-based financial and the others would be the service-based financials. A lot of opportunities exist in the fund-based financials but may be an equal or better opportunity exists in non-fund based financials. So, life insurance companies for example, general insurance companies, depositories and exchanges which are listed, asset management companies which are listed, wealth management companies which are listed and a lot of companies which are non-fund based they do not need capital to grow because these are service based. I would say the ROE profile of some of these sub sectors can be much better. Obviously you have to marry the valuations but I would tend to believe that on the financial side also, the non-fund based financials might have an edge in terms of higher returns over the next 10 years.
On Consumption space: Consumption will continue to be a great theme because as human beings we will always want to consume more and newer things. I would say the pattern of consumption might change but consumption as a theme would continue. The only difference between investing a 10-15 years ago and now is that you could bet on companies from a 50-year view. Now because of this technology, the competition can be much fiercer and much more so you cannot just buy any company or a theme and stick with it for 20-30 years. You have to be alert, you have to just be on your toes at whether disruption can impact the theme or a company. In India, there is huge potential. I always make this point that we consume 1 lakh crore worth of sugar only in this country. Food is the biggest spend as far as the country is concerned and, but there are hardly any food companies which are listed. May be that would be a big theme -- packaged food with both husbands and wives working, the propensity to eat outside food is going to increase. There will be a lot of sub themes on the consumption side, so consumption will remain as a big theme. May be the product or the company might change.
India
NRI
