Election create volatility and volatility plays with our mind. There is a lot of drama created by news channels regarding elections and how the market will be clobbered, but in reality- elections impact the minds of investors far more than the companies they are investing in.
Let’s have a look at the returns of the Sensex across the years …. Sensex was 100 in 1979 it is nearing 36,000 today!
Data suggests that not a single financial year when the election has been held has ended in negative returns for the market. Elections are a known event and markets position themselves appropriately and most often conservatively ahead of elections. The Indian political scenario has historically had little to no fundamental bearing on the Indian economy. The linkage between elections and corporate profits is a very weak one. One must certainly not overplay the connection between Indian macro and Indian politics as we have never come across any empirical evidence connecting the two. Yes the noise around election will lead to some people selling the market but again that will be an opportunity for us at the Plus Delta research team to identify winners at lower levels and boost our clients’ portfolios.
My steadfast perspective – we are in reasonable economic shape – global geo politics and this election noise has taken the market lower but from a longer term perspective irrespective of the government in charge – will earnings recover after a 5 year lull – YES, will there be a gradual pick up in private CAPEX after an 8 year lull – YES, will our GDP still grow at 6-7%? – A RESOUNDING YES!
Those that bought the lows back in 1988 or the dip lows in 2001 or more recently 2008 and 2013 are all looking at the current market with glee. Because they know they are seeing yet another opportunity that made them insane wealth from the past. So I don’t see why one must stop investing. The time is ripe for investors to figure out what portion of their wealth can they apportion for the next 3-4 or 5 years and go all in on equities. For the ones who are already fully invested, Patience during such periods will reward investors disproportionately across the next few years.
Markets are emotive and are driven by sentiment; professional investors like us are paid to keep a level headed perspective during such dramatic times.
Fund Manager – Plus Delta Portfolios
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