Why is beginning of Modi 2.0 the right time to invest in equity?

Last Updated on February 25, 2020

We see a lot of people, for various reasons, making small investments in stocks compared to the allocation they should be making based on their net worth. This is not a good strategy ever, but more so now. Here’s why we think so.

Optimism at the start of Modi 1.0 was too high too early

When Modi 1.0 happened in May 2014, the markets soared. Internally we discussed how we should handle the changed scenario. We concluded that things were pretty bad and would take a few years to improve; that it was not clear what the Government’s priority would be – structural or tactical. If they did many of the latter without doing much at a structural level, the long term would not be very bright and if they did the reverse – administer the strong medicine, the market optimism would subside if not die as things would not be very pretty in the short term. What happened is now history.

I was reminded of something I read in the book the Next 100 Years-A Forecast for the 21^st Century by George Friedman. He said that no President or Leader can make a visible difference in the first term; because of it like joining a game of chess bang in the middle. The board is already set in a particular way and usually not to the advantage of the new leader. In the first term, all that a good leader can do is makes moves to bring the various pieces in an arrangement that he can then play the game to his advantage in the next term. Everybody knew in 2014 that the new government had inherited a pretty lousy game. However, they were being very optimistic about how fast things would get better. At  Moneyworks4me, we decided that we would watch for some time before making changes.

Modi 2.0 betting big on growth and this focus is good for investors

Cut to 2019, Modi 2.0. It started with announcing its goal of a $ 5 trillion economies by 2024. This goal came at a time of economic slow-down and hence provided a section of the media and the opposition to run it down and also run down the Finance Minister. All that changed on Friday 20^th Sept when the ‘big-bang reform’ was announced – reduction in the Corporate Tax Rate. We have no reason to think this is the last of the bold action.

Without getting anchored to a single event, it is important to understand that Modi 2.0 is about growth and removing all obstacles to growth. If you listened to PM’s speech at the India Today Conclave, toward the end he summarized that the last five years was a time to meet the necessary needs of the people (avashaktaon ko pura karne ka samay tha)  whereas the next  five years we have the opportunity to meet the aspirations of the people (akanshaon ko pura karna ka avasar hai). He went on to emphasize the need for speed. We have enough examples of this government doing things that have not happened nor perhaps imagined before. We think the government has reoriented the chess game in its favour in the first term and is driving the game with a resolve to ensure big success. This we feel augurs well for the economy and hence for equity. However, retail investors run the risk of being distracted by recent bad and good news. And that’s precisely what you must avoid

How not to miss the bus this time round?

We want to ensure you do not miss the bus, as many retail investors do.  You need to invest confidently and ensure you increase your investment in equity to the required level. You need to invest in high quality stocks that will benefit from India’s growth. Also, the prices of many stocks barring a handful are either at fair value or below, providing opportunities now and in the near future.  However, we don’t know how long this window will be open. We are working with the assumption that usually, the best times to invest are always short.

Larger coverage to aid increased allocation to stocks

To ensure you are better positioned to gain from India’s growth in the next 5-10 years we have increased our coverage to 200 -added 50 companies. These new 50 stocks are the mid and small cap but pass our rigorous screening and are investment worthy. Many of our subscribers have told us we are very conservative and we are. However, we see India marching ahead and now is the time to build a strong portfolio at prices that will deliver a healthy-high CAGR in the coming years

We recommend that if you are a Top 150 subscriber, you renew your subscription to Top 200 Superstar. We have made a very attractive offer that closes on 15^th October 2019.

Omega customers will benefit from this expanded coverage provided they have available surplus to invest. If you have increased the funds made available under Omega.

If your investable surplus does not warrant the larger plan, we recommend you renew and/or upgrade to the Top 100 Superstars. Here too the current prices are available only till 15^th October 2019.

If you liked what you read and would like to put it in to practice Register at MoneyWorks4me.com. You will get amazing FREE features that will enable you to invest in Stocks and Mutual Funds the right way.

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