The New Year is sure to be an exciting one with India going to the polls to elect a new government. Investors, domestic as well as global, will be keenly watching how that one major event during the middle of the year unfolds.
While the run-up to the elections would keep everyone engaged, conjectures are already being made on the post-poll scenario. There is a growing feeling that change is round the corner. And there are expectations that change, if it happens, would improve market sentiments and spark a fresh bull run in the equity market.
History suggests that elections have had a salutary effect on the stock markets. As we bring out in our cover story starting on page 18, markets moved up during the run-up to all but one elections since 1991, and have given thumbs-up after elections whenever there are hints of stability and reforms.
Already, various estimates of markets touching new highs are being put out by investment banks and brokerage houses on the assumption that the polls would see the end of the 10-year stint of the United Progressive Alliance government and the new formation will be pro-reforms and swift in decisionmaking.
Should you invest based on these electoral predictions and market projections? Our view is that you should not. That is because nothing is certain. The Indian electorate, with its diverse composition and views, is known to spring surprises.
A clear mandate will definitely add to investor wealth. However, any coalition perceived to be unstable or comprising parties known to create roadblocks to reforms might drag the market the other way. Moreover, the new government will have to struggle with the issues of inflation and slow growth.
There are no quick-fixes. There would be global events beyond the control of the Indian government, such as the US Federal Reserve tapering its liquidity injection programme, which has already been initiated in small measure. Hence, positioning your portfolio on assumptions of the look of the new government is fraught with danger.
Investors should have plans of their own and work according to them. Systematic and spaced-out investment works better since it takes care of all ups and downs and eventually, more often than not, leads to wealth creation. Moreover, every portfolio should have a mix of assets, including debt, mutual funds, commodities and real estate. A diverse portfolio is less exposed to sudden shocks.
So what are the investment options for the New Year? What are the likely major events during 2014 and how would they impact your portfolio? How should you react to them? How are the various sectors likely to perform in the ongoing milieu, and which stocks are the best bets?
We try to answer all these questions in our cover package. We also bring you a string of views from industry experts spread across various sectors on how they see 2014 panning out.
We wish you a happy and prosperous New Year.
SARBAJEET K SEN