Effectiveness of Mr.Narendra Modi As A PM & Our Investment Strategy.

November 28, 2013

Effectiveness of Mr.Narendra Modi As A PM & Our Investment Strategy.

Greetings from Hitesh! Thanks for following me on Twitter and reading my blogs. There is air in the market that if Mr.Narendra Modi becomes the Prime Minister, everything will be okay for India.

FII brokerage houses have also joined with Local Media to promote the Rosy picture of India, if Mr.Narendra Modi becomes the Prime Minister. Personally, I would also wish that he transforms India the way he has done in Gujarat. But the ground realities make me skeptical. Let me deal with them.

Ground Realities for Mr. Narendra Modi:-

1. US Economy and USD Rate against Indian Rupee:-

With the QE programs, US is trying to do what Japan has tried and failed for the last 24 years. They are creating the biggest possible bubble.

Due to QE programs, US economy looks healthy in short term and USD is remaining high compared to INR and other currencies of the world.

Share of Electronics and Consumer Goods in Indian import is moving up which nobody is talking about. Along with Oil, this is creating pressures on USD / INR rates. In short, we are importing Inflation to India.

Eg. If I buy Ipad Air from US for USD 500, when exchange rate was Rs.53, I would have paid Rs.26500 but at current exchange rate of Rs.63, I am paying Rs.31500…my cost has moved up by 20% (approx). This adds to inflation.

The same is applicable with imports from other countries as most of the deals are pegged at USD rates only. This alone adds to Inflation / Current Account Deficits by 20%.

Mr.Narendra Modi can not do anything about US or any other International policy stand. So, in this perspective, it will not make any difference, whether he or anybody else become the PM of India.

2. Mindset of Indian Public:-

Starting from 16^th Dec.,2012, we are witnessing lot of rapes and crimes against women coming out into lime light. With the same intensity, cases of corruptions are also on rise.

If you listen to the Speeches of all the leaders’ campaining for the state elections, the quality is too low and it lacks the decenecy. The most worrisome aspect is that general public sitting in the speeches are enjoying and applauding the speaker!!

Above incidence points towards the mindsets of the masses....and to change the same is the most challenging task for any PM. Changing mindset is not as easy as Ctrl+Alt+Del and Ctrl+Copy+Paste.

This is deterring the FDI in India. The silverline in the dark is the Judiciary system which is taking steps to punish the wrong doer.

The Legacy a New PM will Get:-

RBI pumped in about Rs.31000 Crs in Indian banks to support their capital. It has also reported that the banks have written off the NPAs of Rs.1 lakh Crs. These situations may be manageable at this levels but the New PM will be getting these in Legacy.

There are many other challenges in the area of Food Inlfation, Infrastructure, Liquidity and Reinstating the confidence of the general public in Indian politicians

Mr.Narendra Modi will have tough time in dealing with all of the above.

Majority in Parliament:-

Die hard fans of Mr.Narendra Modi believes that he has a magic wand to deal with any issue under the Sun. But his party needs a majority in Parliament to effectively do what he has done in Gujarat.

Most of the estimates published so far is not talking about the absolute majority to his party. Moreover, lot of inparty politics is going on in BJP against Mr.Modi, which will harm effectiveness of Mr.Narendra Modi as a New PM.

Our Investment Stategy:-

If you look at the above factors, any PM will be having a tough time in dealing with the ground realities. Any other black shwan event e.g. War like situations with China, may make things more difficult for any leader.

From 2011, we have maintained that Market will touch new highs by Nov.,2014. We have no doubt about the same. It is just that Mr.Modi is becoming the cause of this bullishness.

Our simple strategy is to buy now and sell before parliament election results are out. The good news is that market will be volatile and you will get opportunities to add at lower levels also. But you need to be in the market to take advantage of the same.

While overall market is going up or down, you will see that select stocks are in TEJI and you need to select only those stocks if you want to make money this time.

In short, it would make more sense to be the part of the market for next 1 year rather then investing in Property or Gold.

To prove our point, for the last 21 weeks, we are giving free calls every week and our calls have generated 2% to 8% per week. You are welcome to follow them. Just write to us and we will keep you in our mailing list. They are 100% free.

If you need personlised investment guidance, just write to us and we will come back to you.

You can follow us on twitter @hiteshmparikh

Have A Happy Investing In New Year.

Hitesh Parikh.