MUMBAI: Annual equity returns from Indian stocks will be about five percentage points on top of the economic growth of 7% to 10% in the coming years, according to billionaire investor Rakesh Jhunjhunwala.

       Known locally as India’s Warren Buffett due to his penchant for equity investing, Jhunjhunwala is counting on the nation’s potential for long-term growth and political stability to fuel further gains in the US$3 trillion (RM12.50 trillion) stock market that’s already been hitting record after record this year.

       His bets range from banks and health insurance – which he says will be boosted by the pandemic – to a broad consumer rally on the back of prime minister Narendra Modi’s policies to give every Indian a home and access to clean water.

       “We are in the middle of a bull phase which will last for a very, very long time, ” Jhunjhunwala said in an interview earlier this month.

       “India will also look lucrative when the United States Federal Reserve (Fed) begins to withdraw stimulus, but there will be short-term disruptions.”

       Long-time observers of Jhunjhunwala, also known as “Big Bull” in India, wouldn’t be surprised by his forecasts.

       Rich valuations and rising concern that the Fed may soon begin winding down its stimulus have done nothing to shake the confidence of the investor, who has in the past said his strategy of picking stocks early in a growth cycle is inspired by US billionaire George Soros and Hong Kong investor Marc Faber.

       Jhunjhunwala’s comments come as local shares have continued to climb despite a deadly wave of the coronavirus that hurt the real economy, rendering people jobless and denting consumption.

       India’s central bank warned in its annual report last month that the surge in local shares “poses the risk of a bubble”.

       “The Reserve Bank and others were worried even when the Nifty was at 8, 000 points, ” Jhunjhunwala said in a video interview on June 3, referring to one of the country’s key gauges that’s now heading toward an unprecedented 16, 000 level after having almost doubled since the end of 2015.

       Only two events would be significant enough to make him wary about India’s prospects, he said. Political instability – which he says is unlikely for now given his expectation that Modi will stay in power at least through 2029 – and any antagonism from India’s nuclear-armed arch-rival Pakistan.

       The Nifty 50 index has risen 12% so far in 2021, outperforming the MSCI Asia Pacific Index by about nine percentage points.

       The Indian gauge is trading at more than 20 times its 12-month forward earnings estimates, versus a five-year average multiple of 18, data compiled by Bloomberg showed.

       A record pace of gains, extreme breadth (95% of stocks are above their 200-day moving average) and penny-stock mania could point to a near-term pause in Indian equities, yet “we continue to be structurally positive for the long term, ” Bloomberg Intelligence strategists Gaurav Patankar and Nitin Chanduka wrote in a report earlier this week. ― Bloomberg