“If you can keep your head when all about you Are losing theirs and blaming it on you,”
“Yours is the Earth and everything that’s in it, And—which is more—you’ll be a Man, my son!” ~Rudyard Kipling (If, 1910)
The above verse is an excerpt from Rudyard Kipling’s collection and often quoted as Warren Buffett’s favourite poem that keeps him going through volatile times.
With many investors getting worried about the upcoming election results and the uncertainty it brings to the Indian political backdrop and consequently in the stock markets, this poem definitely offers some guidance.
Here’s an interesting perspective to how markets have reacted during the pre-election and post-election seasons in the past 38 years (10 General Elections).
Prima facie, one may concur either one of the following:
- 70% of the times, SENSEX has either recovered from the pre-election slump or posted a growth spurt
- 30% of the times, during problematic election results (eg: hung parliament), SENSEX dipped further
So, here’s the idea. Elections come & go, each time elections happen there are two events that manifest every single time – we always get a government and two, life goes on!
Equity, at a very basic level, is nothing but a part of a business and businesses do not come and go with elections. Businesses are here to stay, grow and create wealth.
And if you look at Q4 earnings this week, you’ll notice that we are perhaps at the cusp of an earnings revival and equity outperformance that comes along.
|
Company Name
|
Q4 Earning Result Date
|
Commentary
|
Results vs. Analyst Expectation
|
|
HDFC Bank
|
24-Apr-19
|
Reported a record quarterly net profit of 58.85 billion rupees ($848 million)
Reason: High fee & interest income |
Beats Estimates
|
|
Ultratech Cement
|
24-Apr-19
|
Reported a quarterly net profit of INR.1,017 crore
Reason: Acquisition of Binani Cements |
Beats Estimates
|
|
Maruti Suzuki
|
25-Apr-19
|
Reported a quarterly net profit of INR.1,795 crore
Reason: High foreign exchange rates and commodity prices |
Beats Estimates
|
|
Axis Bank
|
25-Apr-19
|
Reported a quarterly net profit of INR.1,505 crore
Reason: Provisions & Contingencies dropped by 62% Y-o-Y |
Did not beat estimates
|
|
Tata Steel
|
25-Apr-19
|
Reported a quarterly net profit of INR.2,295 crore
|
Beats Estimates
|
|
Yes Bank
|
26-Apr-19
|
Reported its first-ever quarterly loss at ₹1,506 crore
Reason: Total provisions during the quarter increased more than nine-fold. Bank has outstanding loan to Il& FS group |
Did not beat estimates
|
For those wondering if it is the right time to invest given that elections are in progress and markets are volatile, here are my two cents:
Ask yourself another question – when would it be the right time to invest?
After the dust settles?
When will the dust settle? And, will it ever settle?
Equity markets are structured to be volatile and volatility is where real profit is made.
Governments come and go, but equities continue to grow.
Why sit on the fence when the field is so opportunistic?
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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
