So far this year, India's market has run up 20-22%. If the market stays here or even if it corrects 5-7%, it will be very healthy. Whenever the market goes up very quickly, supply would come. It can come from FIIs who are selling continuously or new issuances or from the government. Supply will keep getting bigger as the market goes higher. Domestic flow is also very strong. That tussle between domestic demand and flow is there so markets will stay here or it should correct a little bit and that will make it very healthy. Let's see how this quarter (July-September), things shape up, post GST. I am hopeful that the second half should give a good clue on how corporate earnings are going to shape up.
Withdrawal of liquidity by major central banks will have a major bearing on the global markets and hence India should also be participating in that. They are supposed to be going very slow without affecting the market but they also want to withdraw the liquidity. Markets have built in some amount of action already but there should be no major upheaval in the next six months on account of this particular factor.
Markets are irrational in the short term. Excesses will happen in some of the counters where valuations are more, particularly the new companies which have been recently listed. Their valuations are way above their current counterparts.
We think as a company Eicher Motors is doing well. Its third plant has just about started. They will be able to supply more to the market which is continuously looking for more and more products. Their exports strategy should be bearing fruit in the next few years. We still think there is steam left in that product. Everybody is trying to jump into that particular segment. Bajaj and whole lot of guys are trying to get in there. That segment still has potential.
The Liquor industry has gone through hell in the last 12 months. They have gone through the demonetization effect, highway ban, and GST. Now, at least on the highway ban, some relief was there. From here onwards, the industry should have a slightly more peaceful time. It is a growing economy with increasing income. The competition is very unique. So United Spirits or the other big players have a very unique position. We are still sitting on the stock. We hope that it will do well.
In aviation, the leadership is very clearly established. InterGlobe has 40% share, Air India has 15-16% and rest is fragmented. Air India deal will be the most watched out because Air India is a very significant global international carrier and they have a reasonably good domestic business also. If it gets sold it will do a lot of good to the nation because international traffic which is booming year after year is benefiting Emirates, Singapore Airlines etc. For anybody who gets to cater to that particular segment, the opportunity is very large.
Indian pharma has its own unique position in the international space. Now the competitive situation that has changed in the US is what we are seeing in terms of margin decline for these companies but that should be a passing thing. They had a great 10-12 year run. Clearly, economics have somewhat deteriorated. We need to really see if it is permanent or will something change. In IT, the legacy model is facing challenges but digital part is doing very well.Maybe in two-three years more when digital becomes large, maybe 40-50% of their pie, then growth rate will start accelerating. That will take another two years and they will again start growing better than the way they are now. Maybe the golden period in terms of margins might be over for both these sectors but there is a lot more volumes to be done.
HDFC Bank has grown from just about `1,000 crore (market-cap) in 1996 to more than `4.5 lakh crore now. That is a very tremendous track record to hold for 20-25 years. To say which are the entities which can parallel that kind of track record is very tough to say now because these are new banks and they got listed less than a year back. After two-three years we will get to see who has got that traction. Business, market and opportunity is same and PSU banks are vacating their space so clearly it is a booming opportunity for competent, well managed private sector banks. Growing loan book from `2,000 crore to `20,000 crore is easy but again doing 10x from `20,000 crore to `2 lakh crore is challenging. That's the success of HDFC Bank. From every base they have scaled up by 20-25%. It is too early to say which one will do that. All the new listed companies AU Financiers, RBL, PNB Housing-they all look to be pretty good.