‘Equities less than 12 months? Good luck’

India's macro story has turned on its head, and that keeps Ridham Desai, managing director and chief India equity strategist, Morgan Stanley, “structurally bullish”.

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In a fireside chat with A K Bhattacharya of Business Standard, he says markets may not generate positive returns every year, while advising that investors should invest in equities with a long-term horizon. Edited excerpts:

You are called an 'India bull'. Let me flip the question, have you ever been bearish on India? When and under what circumstances?

■ In January 2007, I wrote a report titled 'Skating on Thin Ice', where I predicted that the Sensex would drop to around 11,000 from about 15,000. Of course, I was premature because the market surged to 22,000 in the following year before crashing back to 11,000 by the end of 2008. So, my call was a bit early.

In 2007, I was genuinely concerned about the relentless appetite for IPOs, inflated market valuations, and stretched earnings.

The profit share of GDP had peaked, signalling that margins were topping out. I believed earnings growth would slow, IPO excesses would create technical challenges, and valuations would correct. However, the global bull market delayed this until January 2008, when the decline finally materialised. I was bearish then.

So when did you turn bullish?

■ I had some concerns in 2013, but it was a brief cycle. Since 2014, I have been bullish. This year marks the 11th year of my bullishness. That does not mean the market will generate positive returns every year. I often remind people that equities are the longest-duration asset class and require a long-term perspective. Unlike fixed deposits or bonds, a minimum five-year view is essential. If you can't commit to that, three years is the bare minimum. Holding equities less than 12 months? Good luck.

From being bearish to maintaining a long-term bullish view, what has changed? What macro variables underpin this constructive outlook today?