Long long ago – at the beginning of 2008 perhaps – one fund manager told me ‘Subra the best, Golden Run of our lifetimes is over’ to see the index go up from 3000 to 21000 in 4-5 years is a super dream gone right, may not happen again.

We then spoke about how we watched 4200 being finally conquered only after 10 years of hitting it once. He asked me ‘Do you think it will take 10 years for the markets to cross 21k again’ – I said, sounds amusing, but let us say the market goes to 11k…and grows at a simple rate of 10% every year…it could take 10 years.

Sounds funny now…but discussing markets is fun, predicting is useless. Both of us had sold some shares in the boom, also bought some shares when the market was at say 10k-11k on the way down, but in the overall portfolio these transactions would not have mattered. Normally I move from 70% in equity to 90% in equity, so really it is some kind of a pricing call rather than an index call. Also there is no great tactical allocation – except once in a while looking at the portfolio and wondering when will I move to more debt. Then I kill the question!

Will there be a Golden Run once again? Of course there will be. Will it be as steep (7 times in 5 years) – frankly I do not think so – we are talking of a much bigger market with a much greater market cap than what was there in 2002.

Hey wait a minute, if the number of domestic investors were to double (just double) our market cap could double. We are at 1.5% of our population investing. If that went to 3% and then 5%…I guess we could rock, but we may not be capable of making it happen!

So maybe, maybe, the FM whom I have written about have seen the best Golden Run ever after-all. To put things in a running perspective we may still run the Half Marathon (21km), the Full Marathon (42km), and the Ultra Marathon…but the short sprint of 5 km in 14 minutes that we did may not be a sustainable pace beyond a 5K race. For the Marathon our target should be a more modest 5:30 hrs and not a sub 3 like some of my friends!

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  1. Many people argue that the golden run was because FII discovered Indian market. Add to it the facts of low interest rates in US, a generation who has never seen a recession and one can understand why there was a dream run. A rising tide lifts all boats.
    Now with all the inefficiency in markets removed, Indian equity quoting at high PE and global economies in recession or slow growth, now I would be amused if market-cap doubles even in 5 years. 🙂

    Best time to get into long-term bonds.
    What is your take, Subra sir?

  2. bonds if your view is say 2 years. Bonds also if you have appetite for bonds in your portfolio…I am happy with equities..but clearly my time frame is ‘forever’…but yes 10% return in a AAA bond like SBI is not bad at all…PERSONALLY I MAY NOT PUT, but the sbi bonds are surely worth looking at…

  3. But Subra, such high equity exposure of 70 – 90%, does it fetch commensurate returns on a risk adjusted basis? I feel equity exposure beyond a point doesn’t add much additional value in terms of risk adjusted returns. Call it diminishing marginal utility? Just like the money that you’ve set aside “for ever”.

  4. Agree.
    I still have my finance text bk from 1989, covered with a newspaper page with the quotes.
    Unlikely to recur, imho, but then I’m a cautious optimist.

  5. Quote : Hey wait a minute, if the number of domestic investors were to double (just double) our market cap could double. We are at 1.5% of our population investing. If that went to 3% and then 5%â€ĶI guess we could rock, but we may not be capable of making it happen!

    Subra Sir,
    Why would indian investor pay double without looking at fundamentals? It is already at 18 PE and profits y-o-y are same or decreasing. Debt is giving around 10% per annum. US, Europe is in trouble.

    Do you think Indian investor is not an intelligent species. 🙂 Or you are counting on the fact that if people can purchase real estate at high price, they wont mind giving high price for equity also.

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