Pre Election Investment Opportunities

Investors almost always take a pause when a big event is about to unfold. Shohini Nath along with Yogesh Supekar explore the investing opportunities in the current market environment ahead of the national elections, while the DSIJ research team recommends a ‘Model Portfolio’ to invest in.

- Shohini Nath & Yogesh Supekar

Markets are showing signs of recovery and have actually taken many investors by surprise. The recent turnaround in investor sentiment has surely enthused investors, making them wonder if 2019 is indeed going to be a year of wealth creation.

The recent recovery has pushed the stock prices higher from their lows. But what is interesting to note here is that the FIIs have pumped in a lot more money than the mutual funds. This is in stark contrast to 2018, where the domestic inflows dominated the markets. In all likelihood, the FIIs inflows into the Indian markets will continue to remain strong.

Quite a few experts believe that the money inflows from the FIIs will not be a problem (at least for 2019), but it is the domestic inflows that could present risk for the markets going forward. The recent two months have seen no growth in the SIP investments, even though the SIP inflows are healthy at about Rs 8000 crore. The MF industry has seen some redemption pressure and a drop in lump sum investments.

The markets have tested investors' patience in the past 18 months. The returns, even for SIP investments, have been negative for several equity MF investors. Says Amol Dandawate, who is a mutual fund investor, “My SIP investments have now turned positive, after being in the negative territory for almost eight months. It is a feel-good factor to see the investment returns turn positive.”

The recent rally in the broader markets can be attributed to the gush of liquidity supporting the markets. The risk-on mood in the global markets is supporting the current rally in the emerging markets. The financial sector, yet again, has been the favorite of the institutional investors. One of the reasons for the current market rally is that it is factoring in a Modi-led NDA victory in the upcoming elections. Also, the markets are factoring in a steady double-digit earnings growth in 2019.