“Equities Will Bounce Back”: Prashant Jain Predicts 14% Nifty Growth Ahead

Added: 2026-05-17

[00:00:00]So, Malakshmi, I don't think you'll be able to name two, three popular asset classes that delivered good long-term returns.

[00:00:08]Good long-term returns are more often made in assets that are unpopular, less popular. I mean, look at 25 years back, tech was the toast, right? I mean what happened prelemon infra was the so I think whatever is popular need not be uh lead to good outcomes that is why good investing is always emotionally very challenging and draining because you will get value where popularity is less and what is popular is comforting to invest in but the long-term outcomes are uh suspect to my mind so I would not worry about this uh narrative about India. This is not the first time Indian markets are experiencing uh correction or no returns for two years. In fact, I started my career and believe it that for 10 years Sensex returns were zero. So see the economic growth is there profits are growing. So in the end markets will have to course correct and one year down the line this whole thing might be forgotten. I mean after all in last five decades how many wars have been fought? How many times has oil prices gone up? How many times your external account has been under pressure? But have you not bounced back on every single occasion?

[00:01:32]>> Okay, let me put it this way. Is there anything that concerns you about the market today?

[00:01:39]>> If I think long-term, if I think even 2, three years, no. No.

[00:01:45]But yes, in the very near term, if oil goes to $150, I hope it does not go. But if it goes, can markets trade lower? Yes, they can.

[00:01:56]>> So, so what could be the downside like?

[00:02:00]>> I don't know. Maybe 10, 15, 20%.

[00:02:03]See, please remember oil was $10 or $20 in 2000. It went to $140 in 2007. Yet, your economy did well. Markets did pretty well. Of course you cannot compare the current situation exactly with that time but it tells you that yes oil is important to India. It will put some pressure on balance of payments but there are self I mean there are corrective mechanisms. If secondary markets don't do well primary market activity will be weak. What does that mean? It means ability to sell down equities in India in lots will be limited. your outbound FDI repatriation will be lower and also the local flow of capital will go into secondary markets.

[00:02:50]So actually if you see every day stocks are moving from weaker hands to stronger hands. Mutual funds are unlikely to be net sellers.

[00:02:59]So what does that tell you that stocks are moving to longerterm investors and therefore at some point this market will mean reward. Does it uh create its own complications and downside? You know uh you're saying mutual funds are unlikely to be net net sellers and earlier you said that you know this equity is an unpopular uh investment today. That is what I understood but >> unpopular. I I'm saying it is a popular investment but it doesn't seem to be delivering.

[00:03:30]>> Uh because it's popular because people are still you know putting in money. you have so much SIPs flowing in um but it doesn't seem to be delivering. Yes, for two years. Yes. But if you look at 45 years, your 100 rupees has become 77 75,000 in Sensex. If you add back the dividends, it will probably go to lakh and 20,000. So it's delivered 1200 times. And equities are not supposed to deliver every year. They I mean if they become expensive, they can correct. If there are some challenges, they can correct. So in this period of 47 years of the history of Sensex there have been 14 years where returns have been negative. So one out of three years returns have been negative. There have been even fiveear periods and once even a 10-year period where Sensex returns were not positive. But eventually in the end returns always catch up. In equities in a growing economy like India returns can be postponed in my opinion but they cannot be killed. Right. So if you look at beyond 3 years uh realistically speaking what do you think from these levels we can compound at?

[00:04:42]>> See uh India's nominal GDP has been compounding around 10 11% for a while now. Profitability is quite optimal in India. I don't see margins moving up across sectors. So and prior to this correction we used to say 11 odd% is the long-term nifty compounding. Now with this time and price correction I think apart from this 11 12% longerterm compounding there should be a one time 10 15% upwards reset so assuming it happens over 3 years I feel >> no 10 15% reset for what >> of multiples apart from the earnings growth >> why is that >> because multiples multiples have fallen to quite low levels multiples have fallen to quite reasonable levels below fair value levels I feel and Therefore I think if you assume markets normalize over 3 years which is quite realistic and mark nifty could compound around 14 odd% next 3 years but beyond that again I think we'll go back to 11 12 >> 14% I mean what are your growth assumptions because most people don't project more than 9 to 10% nominal GDP growth and if you're saying 14% >> inflation will go up Malakshmi you said currency is depreciating it will your nominal GDP growth will go up slightly but even if you work on 10 11%. I am saying a 10% reset in multiples upwards that is 3% annualized. So if you add that two you are at 14% a year.

[00:06:11]>> Okay. Can you explain that? Uh now let's say we start with uh uh with one of the frontline indices. Uh you have about 25 30% uh in financials. Do you see multiples going up there and why?

[00:06:27]>> Yes, I think multiples could improve there. I mean if you look at the leading private banks the retail focused banks they were trading at 4.5 to five times price to book four five years back now they have derated to 1.5 to 1.7 times these are equally strong franchise today as they were then and I think they will continue to grow the current environment is conducive for credit growth working capital needs will go up so I think uh yes they can reate marginally I am they will not go back to four times but I think can they trade up to two times price to book I feel so yes >> Brashant I was just looking at some numbers myself so for example uh uh SBI today quotes that 1.6 six times earnings. Uh you know HTFC and uh ICA bank would be around roughly two times earnings. So uh we look at the past and we say you know HTFC was trading at at the peak I think five and a half six times earnings also. But you look at any other country apart from India, you know, I looked at Brazil, Thailand, uh, Korea, Indonesia, and I'm leaving out China because ch China has been disastrous market. So, it's not a great comparison. Including Europe and US. In no other market do banks trade at more than two times earnings on the at the higher end. Why do we make a case uh then for multiples being anything higher than 2% in >> book value? Two times book value.

[00:07:58]>> Two times book value. Yeah.

[00:08:00]>> Two times you know me. I think State Bank is trading under one times March 28. HDFC Bank is trading.

[00:08:07]>> But that that's an illusion. Why do you talk about 28 and 26?

[00:08:11]>> No March 26 >> because then you are then you are just front ending and accounting for it.

[00:08:16]>> See when I said four and a half times that was also one year forward. I mean we always uh I mean I always look at one to two years forward and that's how you can make some I mean how you can allocate capital so you are already in May right in five months time you will start look everyone will look at March 28 so I am not looking five years out so I think 1.5 times for the best franchise in the country structural 14 15% growth 15% % ROE is not expensive at all. See when you put money in a bank what deposit rate are you getting?

[00:08:58]How much? 6% 7%.

[00:09:02]>> What is it post tax?

[00:09:04]4%.

[00:09:05]>> 4%.

[00:09:06]>> So what P are you paying?

[00:09:09]25 times.

[00:09:11]And if you look at the earnings yield of that bank, you are at 10%.

[00:09:17]1.5 time price to book translates to a 10% earning yield a 10p. So I think last five years in some of these banks the depositor has been better than the shareholder because these banks have derated. I think next five years it could be very different.

[00:09:35]See cost of capital in India has fallen.

[00:09:38]Please don't forget that. You are getting home loans at 7.5%.

[00:09:43]you are depositing money at 6% and look at the concessional taxation on equities the gap between post tax I mean equities have to deliver only 5% returns to come to par with uh fixed income I think that's a very low hurdle rate therefore I believe these local flows will sustain in the markets