I have been writing in all my previous reviews about my bullish view and I feel that today’s decisive victory for NDA and continuation of a stable strong government at the center will provide a boost to a bullish long-lasting upward move in Indian equities with a potential to deliver healthy returns over a number of years. Of course, the move as always will not be in a single straight line but will be accompanied by corrections and volatility.
Huge quantum of NDA’s victory shows that voters of all hues and colours have voted for it. It is clear that the poor and deprived have voted in large numbers for Mr. Modi. After a long time they see a glimmer of hope that somebody is prepared to work hard and implement policies which can improve quality of their lives and of their next generations.
BJP in their campaign stated that they wanted voters to focus on their report card of the last 5 years and then decide to vote. Their achievements for weaker sections of the society included LPG gas connections for crores of families, providing electricity to all villages, building good roads at a faster speed, providing affordable housing , improving sanitation, opening crores of Jan Dhan bank accounts and direct benefit transfers. There is, of course, lots of work required but this huge victory shows that people have voted after seeing at least some improvement in their lives. Interestingly, out of 49 Muslim dominated seats, BJP was leading in 23 demonstrating that people have given more weightage to development as compared to caste and religion.
BJP is very aware that they have to develop the main economy at a fast rate in order to generate money for implementing their social welfare schemes and to make the growth truly inclusive. In its first term, the government carried out important reforms of GST and Insolvency & Bankruptcy Law. Now they are expected to deepen the reforms which can boost the economic growth rate even higher for multiple years. In their initial statement, they have talked about spending huge amounts on infrastructure, rural areas and agriculture. They have described their 2047 vision of India and 100 steps they will implement to achieve it. Included in those are far-reaching digital and energy policies- India has a very good opportunity to leap frog not only in the digital space but also the energy area at both micro and macro levels and all factors combined can have a major transformative effect on the Indian economy.
Overall, our recommendation for long term assets remains the same and that is to be invested in good quality equity schemes. I am even more bullish on small and mid cap schemes. These have been through a major correction for the last one and a half years and when the tide turns, these travel much faster.
