190526 – Before we start, we would like to congratulate Mr. #NarendraModi for getting the second term as the PM and that too with thumping majority. We also wish the people of India for having decided the next government with clarity.
Any government with dependence on regional parties would have been unstable. India is in a time where a majority government can take decisions much faster and there would be no vested interests to pull the government down.
It is first time probably in the history of India that a government has been voted back to power with larger vote share and seat share. It’s a world record, this is the first government which has been voted back to power after implementing GST. All other governments in the world which brought in GST were thrown out.
With 303 seats under its kitty, the new government will kick start on day one of taking the oath. In 2014 Modi was new to Delhi and it took him almost 6 months just to understand the 11 am a culture of Delhi. Also, the bureaucracy was more loyal to the earlier establishment.
The above problems are not present this time and the work would start from day one. The same will be taken very positively by the markets. Though we saw some movements, we did not see upper or lower circuits since the outcome was somewhat factored in already.
The year 2018 has been very bad for the markets particularly for the Mid and Small Cap segments. Due to various factors, the stock prices had corrected 50-70% and most Large Caps too corrected up to 30% resulting in losses across the board in both equity portfolios and mutual fund portfolios.
A lot of newcomers entered the markets in 2017 and 2018 and now are assuming that they made a mistake. They also feel that while the Sensex and Nifty are at all-time highs, why are their investments not moving up?
Fact is this: Firstly, literally only five heavyweight companies in Sensex and Nifty have moved up, other stocks have either moved down or remained flat. Hence, the index may be at high and the portfolios down, but that doesn’t mean you should call it quits. After the election results, there are all possibilities that Index may remain flat and the stocks move. Secondly, Please don’t judge the investments on 3-5 years basis. Equities can give you five-year returns in a single year and make you lose patience in the first four years. You need to invest for absolute long term.
The best thing is to do your Financial Planning and start investing. This can keep you disciplined during the ups and downs. Keep in mind, no one in this world has become rich by investing in Fixed Deposits alone. Even Real Estate will remain subdued for the next five years.
We believe that the markets will be buoyant now. Single-party majority government will take actions faster.
I expect these things in the first half of the term:
1. A 100 days plan will be announced.
2. The full budget may be presented with Bigger Tax breaks for people.
3. Draft of Direct Tax Code will be ready by July.
4. IBC will be strengthened.
5. More spending on Social Reforms.
6. Spending on Infrastructure may increase.
7. Govt and RBI will now push liquidity into the system.
8. Big projects like River Linking may be announced.
Also, since the clarity has now emerged, the corporates will start their investments in India. Many of the companies were just waiting for the results. For example, around 200 companies from China alone were waiting for results to shift base to India.
We at VRIDHI will start the process of making the changes required to suit the portfolios for the New India. We also have been under pressure in the last one year due to bad markets and are now hopeful and delighted that better days for India are in sight. Will now be working for best results. India’s time has come.
Global problems will continue to cloud the markets, but the local opportunities overweigh them. India’s relationship with global leaders is extremely favourable currently which will also help our country.
We will continue updating over the next few weeks as the structure of the new government gets clear. Stay connected with us and work for better tomorrow.
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