We could celebrate Sensex at 50k by 2017, says Manish Chokhani

By Manish Chokhani

A moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends, and when the soul of a nation, long suppressed, finds utterance."

Jawaharlal Nehru’s words reverberated as finance minister Arun Jaitley spelt out the vision for the new economic architecture of India. Since Independence, we built an edifice based on the Soviet socialist/British imperialist models of command and control.

This system cast the government as the supreme master that dispenses favour to its immature, untrustworthy citizenry. This inspector raj degenerated to an inspector terrorism — appellate raj — political spoils culture. Small wonder then that a frustrated nation voted for change based on hopes of development, transparency, smaller, simpler administration and efficient delivery of quality public service and goods.

Investors and businessmen fondly recall the three crucial periods —1991, 1997 and 2002 — when we boldly reformed in the midst of global economic crises under three different political regimes. However, only under Prime Minister Narendra Modi have we begun the task of ideologically recasting the edifice from its foundations by dismantling the Planning Commission and moving towards a pro-choice, decentralised, federal structure.

This is the beginning of an economic architecture that makes the government a facilitator and a referee, while the citizen takes responsibility for improving his own life and exercises his choice with dignity.

Allowing citizens to self-certify documents, Jan Dhan and DBT, Niti Aayog, transferring greater resources to the states, an integrated GST, social security via insurance and pension plans, etc., are all pieces of an elegant design that can take India to the next phase of its evolution – a nation of responsible adults. This Budget takes further steps in that direction.

Widening the tax base with moderate rates, adherence to fiscal responsibility, curbing and resizing expenditures/subsidies/exemptions, co-creating infrastructure even while putting more money in the hands of individuals and local governments. Well begun, though we still have a long way to go.

Now, the promise must be matched by actions and the weight of profits. Consider this-the corporate profit share of GDP could rise from a low of 4% to its previous high of 7% even as GDP itself accelerates from sub-5% to over 8%. This could result in EPS for the indices doubling in 4 years. Keep faith, but be prepared for volatility. The global macro backdrop remains fragile.

Therefore, be ready to stomach volatility and stay invested for long term wealth creation that is possible only through equities! We should expect to celebrate Mt 50k by 2017. When in doubt, remember this — our GDP won’t stop growing.

Corporate profits won’t stop multiplying. New market peaks will keep getting crossed. Only the rate of change and timing can be debated. Fasten your seat belts and enjoy the ride.