Markets greeted our new Prime Minister Narendra Modi 
followed by a MODI-fied government with a thumping 7% gain for the month of May 2014. Normally in election periods, after the results markets would rest for a while, but this time the euphoria continued with robust strength.
On expectations of delivery, almost all the stocks rose to highs, even those that were fundamentally weak. For us the gains were about 6.84%, marginally lower than the broad market average, this was because of our positioning into the fundamentally strong stocks. We don’t invest in companies that do not have growth. Whereas, in the broad markets the rally was in the frontline stocks, which are mostly lagged on their balance sheets.
The tide has been slowly shifting from IT and Pharma to Agriculture based companies and Metal space
along with Auto ancillaries’. We have been cutting down exposure to IT stocks as the price pattern show weakness. But, fundamentally these companies are still having good balance sheets. In the coming quarters things may change against them. With Mr. Rajan, committing that there would be no further hikes in the interest rates, the Rupee will only get more stronger, which will go against the companies that are dependent on exports. While those that have exposure to foreign currency loans will have a upper hand.
Most of the stocks that we have taken exposure in the recent months has gained more than 20%
in a short span of 2 months and are likely to get stronger.
Our country has entered into one of its very strong growth phase. GDP is expected to inch up from the 4.70 levels to 5.5-6.0 in the next 12 months, and is likely to move above 7.0 very soon. For the next 10 years Equities will over shoot all other asset classes in gains. An investor needs to position himself well to cash in, into this once in a life time opportunity.
It would rather be too early to say that, India is in its last phase of 6-10% growth, though for the next 10 years India will rule the world in its economic prowess, we are not likely to witness such growth in the next decades to come. We will move up to be a developed nation in the next 10 years. Africa is going to be the next power house while we settle into the 3-4% growth rates along with developed nations.
So, it would be wise to be invested into Equities and cash in the boom. Allocate more of your savings into Equity investments, own companies that have strong growth potential, you are sure to break all records of earnings growth on your savings.
Happy investing.
