MODI CHOSEN PRIME MINISTER OF INDIA AND RISE OF A NEW HOPE

Today is a historic day in the fate of my India. I was not born when Nehru spoke about Freedom at Midnight and our tryst with destiny. But I can hear the echoes of that speech when I listened to Narendra Modi tonight.  I am blessed to hear him. Thanks to Television. Incidentally the Sensex breached 25000 and Nifty kissed 7500.

My eleven year old son Arjun has been to a few foreign countries on holiday and was so impressed with the development, infrastructure and quality of life there that he had made up his mind to relocate abroad when he grew up. About an year back, he asked me, “Why can’t India have such things?” And I replied that our governments in the past so many years have never let our country develop. But we have a ray of hope, if Modi becomes Prime Minister. After ten years of good governance, he may be able to change India. So Arjun got into a pact with me. He said, “Okay Dad, if in ten years India develops, I may stay back, otherwise I will leave.” We agreed. I indulged a small child in his hopes and dreams, knowing fully well that a country like India has its own problems of caste, creed, religion, language, etc etc.

But today I was hypnotized by a Pied Piper called NaMo. He spoke in Vadodara and Ahmedabad in his addresses about development, development and more development. Of growth, growth and some more growth. A capitalist like me was elated. I personally believe in Galbraith, John Maynard Keynes and Adam Smith. When an individual aspires to get rich by fair means, he becomes an entrepreneur, for every one thousand businesses which start, one survives to become a huge wealth generator, that wealth is then distributed amongst the society by providing jobs, goods and services by the Industrialist. So the incentive to become wealthy for himself motivates the individual to create a wealth multiplier effect. In socialist economies, there is no incentive to excel. It is like Indian bureaucracy. Work or no work, your salary and return is protected. The Rockfellers, the Fords, the Sloans, the Dhirubhais, the Premjis, the Tatas and Murthys of the world have led to jobs, growth and development. They need to flourish in my India too. And Modi has shown us that dream. It has given me hope, optimism and something to look forward to. May be in my lifetime India will become a developed nation.

What does it bode for stock market investors? Whopping returns in the long run. Good businesses just need good markets, qualified labour, raw material and infrastructure and sound standard policies. My prognosis is Modi will fill the gaps and let market forces operate. The unleashing of second wave of reforms will start and Indian economy may see its golden period after 1757 i.e almost three centuries again. 

This decade will be an Indian decade on the world stage. Good businesses will expand and churn profits, bad businesses will die. The survival of the fittest will start without any crony capitalistic aids like that given to Mallya and Kingfisher. So, if you own good businesses, keep sitting on them. Do nothing, let the professionals do the job you just have to sit in the side car investment and enjoy the view. Think you are Dharmendra sitting in the Sidecar of Amitabh’s motorcycle in Sholay, just that Modi is driving the engine this time.

We could see a prolonged bull run with associated corrections. I believe the markets will correct once at least this year.  I may be wrong. Use the big corrections to buy into your buy list. Or else dig deep to unearth some gems behind rocks.

PS:  I have just added some more IL&FS Investment Managers to my portfolio at Rs 13 and 14/-. The dividend yield of 10% was too tempting to ignore. That too from a private equity business which has generated 18% CAGR of wealth for the shareholders in the last 24 years and given a steady dividend. Why worry about Sensex? Let Ms Hingorani run the business, I am happy in my side car enjoying the view and holidaying on my dividends.