Sensex to give 15-20% returns in long-term: Quantum Adv (Moneycontrol.com 29th Dec 2007) Ajit Dayal of Quantum Advisors says Sensex has given compounded returns of 35% peranum in the last 7 years and one must not expect similar returns but returns of 15-20% over the long-term is possible.He further told CNBC-TV18 that valuations in India are not cheap but they are not near bubble phase either and so they are not uncomfortable with current valuations. At present at Quantum Advisors they have fairly low cash levels said Dayal.Excerpts from CNBC-TV18's exclusive interview with Ajit Dayal:
Q: The expectation is that come January there is going to be big dollops of cash and that’s probably going to take the market a bit higher than where it is. Would you go with that theory?
A: We have to go back a bit and look at- if you had put Rs 100 in the BSE 30 Index in January 2001, today that Rs 100 standing in December 2007, seven years later effectively would have been Rs 874. So that’s a profit of Rs 774 over the last 7 years i.e a compounded rate of return of about 35% per annum or about 2.5% per month. I don’t think that people should expect January-February-March-April 2008 to sort of give you that sort of return. Having said that we are very optimistic on India. We believe that Indian economy is totally in many ways dealing from what's happening in the US. It never has really been coupled to the global economy. India is very much a domestic driven economy. Unfortunately, some mishaps in policy where we have gotP-notes that has made us part of global capital flows in a far more accelerated fashion then probably what we can handle and so if something happens in the US- subprime crisis, if the big groups out there begin to withdraw capital from all their sort of territorial expansion plans and territorial investment plans which includes India and they take capital back home then yes, because of the P-note exposure and linkage that the Indian capital market has you could see a sell off. So will January 2008 see a sell off because of what's happening in the US or will January 2008 see an increase-We don’t know but one should expect about a 15-20% rate of return in our view from Indian stocks in the long run not the 35% per annum that we have seen since 2001 in last seven years but certainly a 15-20% long-term sustainable number still looks very good us.
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Q: The expectation is that come January there is going to be big dollops of cash and that’s probably going to take the market a bit higher than where it is. Would you go with that theory?
A: We have to go back a bit and look at- if you had put Rs 100 in the BSE 30 Index in January 2001, today that Rs 100 standing in December 2007, seven years later effectively would have been Rs 874. So that’s a profit of Rs 774 over the last 7 years i.e a compounded rate of return of about 35% per annum or about 2.5% per month. I don’t think that people should expect January-February-March-April 2008 to sort of give you that sort of return. Having said that we are very optimistic on India. We believe that Indian economy is totally in many ways dealing from what's happening in the US. It never has really been coupled to the global economy. India is very much a domestic driven economy. Unfortunately, some mishaps in policy where we have gotP-notes that has made us part of global capital flows in a far more accelerated fashion then probably what we can handle and so if something happens in the US- subprime crisis, if the big groups out there begin to withdraw capital from all their sort of territorial expansion plans and territorial investment plans which includes India and they take capital back home then yes, because of the P-note exposure and linkage that the Indian capital market has you could see a sell off. So will January 2008 see a sell off because of what's happening in the US or will January 2008 see an increase-We don’t know but one should expect about a 15-20% rate of return in our view from Indian stocks in the long run not the 35% per annum that we have seen since 2001 in last seven years but certainly a 15-20% long-term sustainable number still looks very good us.
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