Fisdom Weekly Update (Issue #27): Ab ki Baar, Nifty 12,000 paar? & more…

India has begun conducting the world’s largest, democratic general elections this week. Opinion polls have swung towards reinstating faith in the current government, albeit with reduced majority.
Here’s what the opinion polls conducted in March’19 look like:

While the general elections typically induce capital market volatility as most investors choose to sit tight till there’s more certainty around the political situation, this time seems to be different.

Most times, foreign investors remain fence-sitters as the great Indian elections come into play, but this time, they’ve jumped the fence onto the field – right at the beginning. Bellwether indices have been charting new highs – Nifty at 11,700 & SENSEX at 39,000.

So, is this all happening just because everyone is expecting the current government to be re-elected? Stronger election result anticipation is definitely a factor, but that’s not all of it.
Here are a few other factors that may be aiding investment growth in India:

Stronger Currency

INR strengthened by almost 2.3% in March 2019 making it the star currency in all of Asia. This strengthening of the INR can be attributed to a multitude of factors including foreign portfolio buying stocks & bonds to a cumulative tune of $8 billion this year.

Softening bond yields

The 10-year government bond yield softened significantly as RBI implements a solid monetary easing policy through rate cuts and other measures like the swap auction. This is expected to increase liquidity and promote credit & growth in India while inflation continues to be in control. Decrease in yields can be interpreted as increase in price and profits for bond-holders

What lies ahead? What should an investor do?

While elections typically lend an air of increased volatility to stock markets but, quite frankly, volatility is where wealth is manufactured.
All indicators seem to point towards a fundamentally strong India and stronger Indian economy. This sets stage for a stronger future for Indian equities. Now is a perfect time to step-up SIPs and for investors with a lumpsum, it is advisable to go through the STP route – invest in a holding fund and periodically transfer to pure equity funds.
Feel free to reach out to understand more around what type of equity funds suit you best and what themes do we expect to play out post-election.

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If you have any concern, please write to us at ask@fisdom.com or call at 080 48039999, we would be happy to answer your query.

Thanks,
Nirav (Head of Research)
Fisdom