This is such a nice interview about Indian market cycles. I have tried to summarize my key highlights below:
- The last decade belonged to leveraged consumers which is probably why retail loan financiers did so well (Bajaj finance, Capital First) along with consumer oriented stocks (durables, FMCG, etc.).
- This is similar to what happened in 2000-2010s which belonged to the leveraged corporates (aka power, real estate, industrials) and corporate facing financials (ICICI, Axis, SBI). At that time, valuations went haywire for economy facing companies (real-estate, power, industrials, etc.).
When we will be looking back at this period after a decade, will we also compare the consumer valuations of 2010s with industrial valuations of 2000s? This also explains so much euphoria behind anything related to consumers (video 1, video 2 from PPFAS).
High compounding of returns happen when future (not past) growth rates are high and it is accompanied by a re-rating. We have to search for the next potential bubble (which is very hard to predict), and generally companies which led the last bubble do not lead the next one (eg: ACC in 1992, Infy in 2000, L&T in 2008, Sun Pharma in 2014, Bajaj finance in 2020). All these companies reached their all-time highs again (Sun still has to do!) but much later.
