“If we remove the global commodity-linked cyclicals — we don’t have a definite view on commodities — like refining and metals and focus on consumer companies like media, banks, pharmaceuticals, automobiles, we think earnings growth should be north of 15% per annum,” he said.

It is very challenging and we rarely take a view on the short-term direction on the markets not because we don’t want to but we find that equities as an asset class are not reliable when you take a short-term view on the markets.

To put things in perspective the 20,000 index one year back and also the 8,000 index last year, they were aberrations and many people are concerned that the rally has been too sharp from 8,000 to 16,000. The rally has been sharp but to be fair that rally came after an equally sharp fall and I think the fall was wrong and this rally is merely corrected what led to a severe undervaluation. When we spoke earlier, the index was below 10,000 and I had discussed that the index appears to be quite cheap and though you can’t time it where it would go in one year, you could focus on valuations.

At 8,000–10,000, we said the long-term returns would be significantly ahead of earnings growth and today we are saying that long-term returns would be in line with earnings growth. But I don’t think there are any reliable indicators as to where the markets are going in three or six months from now.

Between the last time the index hit 20,000 to let’s say another six when it goes to 20,000, two years of earnings would have elapsed. That would clearly mean we have to focus on the PE multiples and on the absolute index level, the markets would still be close to fairly valued or maybe marginally overvalued. We are a growing economy — I only feel that India’s growth is not materially dependent on worldwide GDP growth and we think strongly that earnings will continue to grow. There is a big judgment always that your earnings could surprise be on 5% on the upside or downside.