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October 29, 2008

Rakesh Jhunjhunwala vs. Shankar Sharma

Normally, Samir Arora of Helios Capital Management makes for good TV. Not on the "Samvat 2065" program on CNBC-TV18 though. The often volatile sparring between his co-panelists - well known stock market investor Rakesh Jhunjhunwala and Shankar Sharma of First Global Services - on Diwali day, made the normally outspoken Arora seem quite staid.

Some of the issues the two disagreed strongly on included the rising US dollar (SS believes it will continue to appreciate; RJ the opposite), sectoral trends (SS insists the winners in the bull run will suffer the most since that's where investors can still "recover" some profits; RJ disagrees) and India's correlation with global market (SS feels India will continue to be highly correlated; RJ insists actual earnings matter more).

Samplings from the colorful debate:

SS: The reason why emerging markets did well was because the weak US dollar drove up commodity prices. That drove earnings in emerging markets in general, made a flight away from US dollars into non-US dollar assets. That tide has changed. The US dollar is back to being the safe haven, the reserve currency. That change is not going to reverse anytime soon. So one will see the euro weaken against the dollar. All emerging market currencies are very weak against the dollar. That’s the central problem. It’s not just about India or the BRIC countries. The larger problem for emerging markets is the strength of the US dollar.

RJ: America also requires 6-7% current deficiency. Who is going to finance it and for what reason? How long will my driver say: put that money in a bank and the Indian government will invest in the US treasury for that person in America. So the dollar has to reverse, it is only a matter of time. As far as Indian fundamentals are concerned, I don’t know how worse or better they can get but to my judgment, we are best suited to face whatever problems arise, amongst the countries in the world.

...RJ: One cannot look at the S&P and Sensex in isolation. That from 2002, even in the base estimate that you gave me, the Sensex earnings are up 3.35 times. I don’t think the S&P earnings are up 3.25 from 2002. They won’t even have doubled. So one cannot compare the S&P to the Sensex. You are comparing apple with peaches. Here the earnings have gone up 3.25 times, there the earnings have doubled.

SS: That is completely incorrect. It is the same global bull market pond that every market drinks from. Nobody stands out. The only way you can say it is an Indian bull market is when every market is down and India goes up 50%. Then I will agree with you. Otherwise it is a big global macro move....During the last 10 years, I don’t know of any six-month period in which India performed very differently from how the world was performing. That’s the reality, we have to admit it.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.