I usually do not hazard guesses. But the landslide victory of the Bhartiya Janta Party(BJP) in the biggest electorally meaningful state of Uttar Pradesh, day before yesterday seems to compel me to WARN INVESTORS because stock market pundits and soothsayers will start building stories to befuddle you.
First the victory of the political party. It only tells one thing. Indian political firmament has changed. There will be one major party for a long time. All other opposition has been reduced to a regional status. And the sole reason is A STRONG LEADER in Narendra Modi.
He is honest, bold, intelligent, charismatic, decision taker, empathetic, disciplined and a good communicator. That is all what is required in being a good leader, a good CEO. India’s luck has changed. What he is able to deliver is a different story because that has infinite variables. People of India and the society at large has to change for deliverables to be visible. A morally decadent and corrupt people cannot become a great nation, is my personal opinion. Unless we learn to obey rules and laws and bring the rule breakers and law breakers to book in a swift and visible manner, we will remain a story with potential irrespective of Narendra Modi or Amit Shah, the president of BJP. It is the same Indian who drives in a wrong lane with impunity, drives drunk and without helmet, kills people in road accidents and then gets away with it and expects the others to be honest and straight forward. We behave in other countries as NRIs or PIOs because we can be deported from there, because we can be sent to jail, because we can be exterminated by the local town community if we do not subscribe to their moral norms. But we take India for granted. So we can’t be a great nation. We will be a rich nation, we will be a populous nation, we will be a happening market, we will be militarily strong. But great? That’s very very far as of now. We the people have to make it a great nation not Shri Modi.
Now the markets. 14th of March 2017 will have the markets shooting up. Nifty may even cross previous all time high of 9100. And in a few months time we may see 10000 on Nifty this year itself. But the euphoria and narrative of pundits needs to be toned down. They will discount elections of 2019, they will say India will have stability for next 7 years blah, blah, blah. But black swans can happen. End result — markets will be over hyped. They will move further from reality. And the reality is the bottom line of businesses. Unless profits are made stock prices will be unsustainable. The Mutual Funds are sitting on huge cash. The trickle of SIPs is increasing. All of them have to invest and buy stocks. That itself will take the market to fresh highs.
But as a value investor, you need to be warned and cautious. Stay invested but for fresh investments wait for the opportunity when post new highs the markets crack heavily. Markets will ultimately realise the truth and be the “weighing machine” instead of “voting machine”. Some random event will be the trigger for the crash. It will crash back to around 8000 levels. Wait patiently for the same to again go bargain hunting.
Till then Hasta La Vista……