ELECTION RESULTS AND A JUMP IN INDIAN STOCKS

Election results to four states of India have been announced yesterday. The pleasant surprise for Indians in general and me in particular is the success of Aam Aadmi Party(AAP). I just happened to give a “white” donation to them towards their cause. It augurs well for the Indian democratic system. Parties like Congress, BJP and other regional parties would be forced to change their game plans. AAP is a game changer. Like Nirma challenging Hindustan Lever. A David vs Goliath. It will force the other parties to put up honest candidates and once more and more honest candidates start coming up the likelihood of better governance increases. Better governance will lead to better decision making in the interest of people, industry and the country.

What India needs is jobs for the youth, those jobs cannot come through subsidies of various social schemes, they will come from enterprises/businesses. And business just needs a conducive environment for growth. Good policies, infrastructure, tax laws, judicial system, mature banking system, a good capital market to raise funds and a market to consume its products. We have everything except first two in my list and the election results have raised the expectations of the markets towards some good governance and resolution of infra issues. 

Will Mr Modi, if he comes to power solve the issues? I will hold my horses. The way Indian voter votes, it may just leave scope for a hung parliament like Delhi. So, first caveat is a PM with decent majority in the house. Because in a government with no clear cut mandate, tough decisions are never taken. As a result, no PM would be able to do anything worthwhile. Yes, infra can be taken care of but other policies may falter.

The stock markets move on rumours and correct on news. The earnings of companies have to substantially improve for the bull rally to sustain. Businesses have to increase their profits. For a long term investor, the time to buy was last few years and not now. 

In case there is a major correction, I am no soothsayer and do not like to predict short term movements, I would like to accumulate more of my buy list. Otherwise, if you have missed the bus, do not try to catch a running bus, you may just fall flat and hurt yourself. Continue your rupee cost averaging of mutual funds (SIPs) but nothing beyond that. Wait, till the markets again fall. Stay away from unhealthy junk diet of Options, Derivatives and Commodity futures.

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