Top seven stocks Rakesh Jhunjhunwala is betting on :: ET

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Worried about a sudden fall in the Sensex in the month of December? Well, the big bull of Dalal Street, Rakesh Jhunjhunwala, has got some good news. He sees the markets to triple in the next 4-5 years.

The S&P BSE Sensex, which has rallied nearly 30 per cent so far in the year 2014 till November, came under intense selling pressure by foreign institutional investors (FIIs) in the last month of the calendar year 2014.

The index has dropped a little over 1500 points so far in the month of December, fuelling concerns of a further fall possibly in the coming year.

Despite the recent fall, the rally is not over yet as India continues to be in a bull market, says Rakesh Jhunjhunwala, Partner, Rare Enterprises.

In an exclusive interview with ET Now, he further outlined that India is not a crowded market yet and could very well attract huge FII flows, if it can get its act together and have low inflation.

Analysts across brokerage firms are of the view that India is firmly in a multi-year bull market and as the economy recovers, corporate earnings growth is also likely to bounce back in the coming quarters.

If this is a true bull market, corporate profit as a percentage of GDP will go up, says Jhunjhunwala. Therefore, one need 20% to 23% earnings growth as GDP growth numbers climb up to 6% or 6.5% over the next five years.

"So, if PE ratio and earnings growth go up to, say, 18% or 20% over the next five years, then earnings will double, and PE will improve by, say, 30%. So, in the next four to five years, you can see the Nifty and the Sensex at three times their present values," he says.

Top stocks Jhunjhunwala is bullish on:

Titan Company, United Spirits and Lupin: Jhujhunwala is holding all the three stocks in his portfolio. According to him, all the stocks mentioned can certainly give double digit returns going forward.

"They will give me a return which is commensurate with earnings growth. There is no scope for the PEs to expand, but there is scope for earnings to expand," says Jhunjhunwala.

Lupin has had a tremendous run, says Jhujhunwala. In 2008, the price was Rs 700, it could be Rs 2000 tomorrow. "I don't know. It could consolidate for the next two years. But as a company, Lupin has still got lots of scope to grow. It is a very well-managed company," he says.

Multi Commodity Exchange:

Jhunjhunwala sees tremendous potential in MCX as he sees the stock as a proxy to India's financial sector. The stock has already rallied nearly 70 per cent so far in the year 2014.

"I think MCX is a proxy for India's financial sector, India's growth. People also used to say that State Bank of India was a proxy for India's financial sector," he says, adding that it is highly unlikely that in the next 50 years also, MCX's leadership in the commodity market is going to be taken away.

Crisil Ltd:

Jhunjhunwala sees immense potential in Crisil, because it is a proxy for India's economic growth and the financial sector. "I got Crisil because Crisil was unique. If India's economy grows - free cash flow, no investment needed, difficult monopoly to break - then volume is going to go through the roof. So it is a proxy for India's economic growth and the financial sector," he says.

Housing Finance Companies:

Jhunjhunwala is very bullish on HFCs and thinks that they are the best part of the whole finance sector.

Rallis India Ltd:

The run has been a little disappointing, says Jhunjhunwala, but companies go through such periods. At the moment, Rallis is a vast underperformer. "Sometimes I also think about that investment. But I am hopeful it will perform," he says.