If some other government comes, it is not going to be the end of India because India is a responsible democracy.

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But I desire, wish, hope that we have a BJP government, big bull Rakesh Jhunjhunwala, Partner, Rare Enterprises, tells Nikunj Dalmia of ET Now at the India Economic Conclave in Mumbai on Thursday. Edited excerpts: In the beginning of the year you had said said crazy PE multiples for midcaps not a good sign. What is your view on midcaps now? I can identify very small number of midcap companies which I can distinctly say dominate the businesses that they are in. I am quite sure now people had forgotten about 40 or 50 PE at 7-8% interest rates. And I still hold to my statementYou still feel the crushing fall that we have seen in midcaps in general. Selective stories are different but as a category, midcaps are slightly shaky and they are still expensive? The midcaps have come off a lot, But they cannot have the kind of valuation that largecaps have for the simple reason that they do not carry the quality of businesses that the largecaps have or domination or the size or the cash flows. I think at some point in time, the market was too excited about midcaps, now that has mellowed. You also spoke about the fact that this year is going to be a year of extra volatility. 2017 had spoilt us because we had not seen volatility but 2018 was a volatile year.Why is there so much of up and down in global liquidity markets and other asset classes this year? Worldwide volatility has ruled the roost. I think a lot of volatility is because the actual exchange of the assets in relation to the trading is very few. Look at Yes Bank. Some 10 crores shares are traded today and actual shares which exchanged hands is 80 lakh. So obviously, when 80 lakh is increasing to price of 10 crore, at least temporarily, that leads to volatility. Also I think. it is because of nervousness, uncertainty and then when markets go down, stop losses are hit. So volatility is here to stay. ‘I would like Modi to be PM again’ It is also that time in the cycle when we start worrying about elections and given what we have got in terms of state outcome election results, what is your view on the market? With uncertainty because it is very difficult to predict the election in 2019. BJP had a stellar win in 2003 and in 2004 June, they lost the national election. I personally feel the MP and Rajasthan outcomes are very good for the BJP because you have 15 years of incumbency. You have a real identical vote. In Rajasthan, you have a history of change of government every five years. The BJP has not lost as badly as the Congress lost in 2013. They say that lots of presidents in America lose the congress but they still win, they get re-elected. It happened with Obama, it happened with Clinton. I would not take this election result to be the final guide to the 2019 result. I will still bet my money on a BJP government led by Mr Modi. Having said that, India is greater than personalities. I would very much like Mr Modi to become prime minister of this country again. I am BJP supporter and I will remain one. But the question is if some other government comes, it is not going to be the end of India because India is a responsible democracy and we have had no single government in power, party in power in parliament for the last 24 years from 89 to 2014. So it is not that the world is going to fall if a non-BJP government comes in. But I desire, wish, hope is that we have a BJP government. You always mentioned over the years do not look at the news whether it is good or bad, try and figure out what is in the price, what are the markets betting on? In your assessment from the election outcome, what are the markets betting on? Well markets have now forgotten the election. The election will again come into the markets in February-March and markets are betting on the fact that most people are taking the Indian economy wrongly. I look at it differently. We have had five years of sub-potential growth. You had five years of sub-capital expenditure. You have had a deep banking crisis. I think IL&FS was the peak of the banking crisis. I do not see any other institution that is now left to be recognised in any huge manner in the NPAs. Capital investment is reviving. Consumption demand is good. The Indian economy is ready to take off. With reduction in oil prices, the macro is very good. We have historical low inflation. We have a problem of plenty of food, not that there is no food. In 1966, we had to beg the US for wheat. Today we have so much wheat we do not know what to do with it. The prediction was that GST will lead to at least 1.5% extra GDP growth. Everybody is talking of the problems of GST. Nobody is talking of the benefits. The economy is surely on upward trajectory and that is what the markets are recognising. Two things her; first, the economies are in upward trajectory and second is there is loads of local money still waiting to come. Based on these two facts. I still remain bullish. I would like to share the anecdote which Mr Jhunjhunwala shared with me in 2008 or 2009. He said “ Watch my boy! A tsunami of domestic flows will come to India.” I think we have seen that. The SIP flows what have come to India and the kind of domestic investor belief which is coming to India is unparalleled and for me that is rise with India. It is nothing. The SIPs are a billion dollars a month at the moment. This will reach 2-3-4 billion dollars and remember the SIP investor is not coming to make equity returns. He is comparing it to public provident fund, to insurance and insurance. You are paying 40% commission for the first year and 15% later on. If the person who is investing in SIPs, gets 12% to 15% compounded returns, he is going to be very happy. I do not think there will be much volatility in the SIP flows. The path is only upward. 98% of the money is made in the stock market is by being a bull not necessarily a big bull but being a bull. I made one of the biggest fortunes in my life by short selling in 1992 So you have always been a bull ever since you joined stock markets? No, I made lot of money by short selling. Harshad Mehta was a dream. I made one of the biggest fortune of my life by short selling in ‘92. In fact, I will tell you an incident. We started short selling from 4200. So BSE CEO Mr Mayya would call me and say you are short selling, I will take your badge. Again he called me at 3,500, at 3,000 and then he called me when the index was 2,200. I told him Mr Mayya, wouldn’t you have been happy if you had joined me, instead of firing me at every stage? But did he call you after that at all? Yes we have short sold so many times. It is usually said that you can either be a good trader or you can be a successful investor. In your case you have been a greater trader and a successful investor. How do you manage both these aspects? Well if you have a wife and a mistress and you manage both well, you can do both trading and investing well. And how do you manage that? You keep them apart. One should not know anything about the other. Investment is a fall or rise in valuable investment unless it is extreme or it is some event laden which has significance. The daily values have no significance to me at all. Trading is momentum. Trading is le fatafat, de fatafat. Maro aur bhago. (Trade and run). You have to follow the crowd in trading. In investing you can be a bit contrarian, still make a lot of money. Trading is my friend and trading the ROEs are highest. The cash flows are great. I love trading. Given a choice I would like to make all money out of trading. But that is not possible. You lose money also. I have lost money so many times. You talk about wife and mistress. Now, in trading you have a stop loss. You can get out. In a marriage there is no stop loss. There is a stop loss. See we will have to end the marriage to know there is a stop loss or no. So fortunately we do not have to go to that stop loss here. Let us talk about the fact that you are positive on the economy. Now for any economy to grow, you need a vibrant credit market. You need lots of liquidity. Given that there is cash crunch, , do you think that the credit numbers could hurt the economic growth? Utpal my partner was just telling me that now you have to be clean, you have to be straight and there is no lack of credit for worthy borrowers. So I do not think that credit crunch is going to be there. Temporarily maybe there was some credit crunch. May be it is there in December, but you are going to be able to get money from January. The only thing is because we are a nation with a current account deficit, we need foreign capital. So we have to watch that. I do not think this is matter of NBFCs and banks. In September when we spoke last you said after years I have become bullish on corporate banks and you said the NPA problems are behind us. Corporate banks have done reasonably well. Do you think the NPA problems is genuinely over for some of them, at least the good corporate banks? The recognition is over for most of them or for all of them. The provisioning will depend on the individual banks. But there will not be any large recognition left now. All the possible gorillas in the room have already been locked.