Indian stocks may crash soon: Rakesh Jhunjhunwala

Big bull Rakesh Jhunjhunwala feels the Indian stock markets, currently on an upward rally, may 'burst' in a month or two.

"If your see the formation of the indexes, all the stocks are going up, indexes are going up. (There are) minor corrections at every point. You cannot have this kind of a rise...(a) peak without burst. I think the burst will come within one or two months," Rare Enterprises partner Rakesh Jhunjhunwala said at the Private Equity International India Forum 2009 in Mumbai, on Thursday.

Indian capital markets have been heading northward led by robust liquidity positions and on the belief that economic recovery has begun.

However, Jhunjhunwala said: "I have a right to be wrong and I may change my opinion very fast."

He said that the future of Indian markets depended on the performance of the Indian economy and the international scenario.

"I think economic growth in India is going to be between 12-14 per cent over the next 5-7 years. I think the factors that are guiding this growth are irreversible, whether they are skills, tolerance, democracy, demographics," Jhunjhunwala said.

"And if growth in corporate profits is going to be a percentage of nominal GDP growth which it is worldwide, I don't see any reason why corporate profits should not grow between 15-17 per cent compounded," he added.

However, there is still some pain left for the western economies which have not yet witnessed the peak of the economic slowdown.

"As far as the economic slowdown goes, I think we have not (yet) seen the peak. I think the next 2-3 years for the western world are going to be far slower than for the rest," Jhunjhunwala said.

According to him, even though India places significant importance on foreign fund inflows, the amount of local money invested in the markets in the last five-years has been far greater than foreign money.

The Dalal Street guru said he has decided not to invest in start-up companies 'because you have to nurture them. Bringing them to size is a painful process'.

"This year, I think Rs 2,500-3,000-crore (Rs 25-30 billion) local money will come and in two years maybe Rs 6,000 crore. I am bullish. The flow of money is going to go through the roof," he said.

India is not expected to hike interest rates before March 2010, Jhunjhunwala said.