NEW DELHI: Big Bull Rakesh Jhunjhunwala says the market is preparing for another bull run, but two global factors are worrying him.And they are not US President Donald Trumps trade war threats or crude oil prices.What worry him more are Chinas rising debt and the probability of a disintegration of the euro region.
Any negative development in this region may upset the bulls in India, the ace investor told ETNow in an exclusive interview.The euro is not going to last.
It remains to be seen whether it breaks in one year, two years or five years.
The second thing is I do not know what is really going to happen to China, because they have extremely high levels of debt.
These are two things globally that can upset India.
Nothing else can, the Big Bull told ETNow.A survey report released by global brokerage BofA-ML earlier this month showed euro zone debt and potential breakdown, Chinese growth and populism, quantitative tightening and trade war worries have been some of the dominant concerns among fund managers globally.Full interview: What bear market We are in a state of consolidation: Rakesh JhunjhunwalaChinaIn case of China, a January IMF working paper on the countrys credit boom concluded that Chinas debt overhang, if left unaddressed, could pose risks to its financial stability and growth.With Chinas rising economic footprint and its growing influence on global financial markets, its ability to deflate the credit boom safely matters not only for China but also for the global economy, the working paper noted.It noted that Chinas non-financial sectors domestic credit-to-GDP ratio was stable at around 135 per cent before the global financial crisis, but huge fiscal stimulus lifted the ratio to a high of 170 per cent by 2011.Over the past five years, domestic nominal credit to the non-financial sector has more than doubled, and it rose to about 235 per cent of GDP as of 2016 end, the IMF working paper said.Euro zoneIn the case of euro zone, anti-EU sentiment has been growing in the region.
Britain is closer to exiting the union.
The election drama in Italy earlier this year triggered knee-jerk reaction in stock markets globally.The countrys Deputy Prime Minister Luigi Di Maio, though, said his government was not considering any plan B to leave the euro zone.
This is after the European Affairs Minister Paolo Savona said the country should be prepared for all eventualities on euro membership.What does Jhunjhunwala adviseThe ace investor says one has to be mature in understanding the market, and not get unnecessarily excited about the game.We need more mature outlook and we need to filter the reality from the noise.
Everyone is buying midcap, but that does not mean you should have one and hope that such an investment would reward big, he said.He said since India does not have very high corporate profits and the economy is only now seeing an upturn as benefits of the reform measures begin to kick in, there is no way this market will reverse anytime soon.