In a CNBC-TV18 exclusive, market veterans Ramesh Damani and N Jayakumar caught up with Dalal Street’s big bull Rakesh Jhunjhunwala on the sidelines of Economic Forum for India at LSE 2015.

The discussion veered around the e-commerce space commanding “irrational” valuations. None of the market masters have ventured out here and fear the euphoria may end up like the 2000 dot com bubble burst.

Below is a slice of the conversation

Jayakumar: We have had through this last one to one-and-a- half years multiple low hanging fruits and a lot of them seemed to have been plucked away and investors have come in. So in this bottoms-up kind of approach that you have, is there some area that you feel is unexplored? I know people talk about logistics but those few stocks kind of went out of the radar very quickly; are there some areas still which investors can look at and say with patience we can make a lot of money?

Rakesh Jhunjhunwala of Rare Enterprise: My investment is more company specific rather than sector specific. So I think there are still a lot of investable companies in India. I still find valuations of some companies extremely attractive. What happens is you have to be ready to face periods of underperformance. I buy a stock; I and Ramesh Damani bought public sector stocks in 1998-1999. We underperformed the market vastly. Himachal Futuristic went up 40 times, Shipping Corporation of India (SCI) went from Rs16 to Rs 26. I was a king but eventually Himachal came back to Rs 100 and SCI went to Rs 200/ share. So if you have the conviction and you are ready to face periods of underperformance, there is a lot of opportunities.

Damani: A lot of the Nifty stocks are still below 2008 levels, right?

Jhunjhunwala: I look at it this way; in the trade I can do anything but am I going to invest at 60 times P/E, 70 times P/E? No and I won’t advice anybody. The second area are stocks which are cheap by historical standards and valuations but there is a question as to how well they will do? So now if you want to invest and you hope to have good returns, you have to go below the quality. You have to compromise quality.

Damani: Which you are not going to do.

Jhunjhunwala: I will compromise quality at a price. If someone gives me United Breweries and United Spirits at Rs 200 crore marketcap, I will buy it.

Jayakumar: One section of the market -- which is the space that you haven’t participated, most of us haven’t maybe because we think we don’t see earnings --- which is the e-commerce space where irrationality, one would argue, is at its worst ever. What is your thought process of that?

Jhunjhunwala: We don’t have to participate in every party.

Jayakumar: But is that party here to stay?

Jhunjhunwala: I don’t know - I think e-commerce will grow faster than what we are estimating. I agree with Ramesh, it may be smarter to buy the service providers rather than buying these companies. I don’t want to participate in every party.

Jayakumar: But would you like this party to the 2000 dot com burst?

Jhunjhunwala: You have any doubt?

Jayakumar: None of us do that. But irrationality of valuation at some point in time will catch up clearly.

Jhunjhunwala: Irrationality of valuation? Forget that, forget the valuation, where is the completed business model? I want to know Flipkart’s business model. I want to know how you will be profitable? Second is if you look at any company in the world, the real companies who have given returns to investors had been built by the cash flows of those businesses, not by investors’ money. When are these cash flows going to come?