Motilal Oswal has written an article in ET titled “Time to rejig your portfolio! Best time to invest in equities” where he notes that change is sweeping the country. He points out that this is the first time since 1989 that a single party or any alliance (pre-poll) for that matter has gained absolute majority in the Parliament.
Oswal explains that with the NDA emerging as a single largest party, a few post poll alliances would mean the ruling coalition would have near two third majority in the lower house required to pass the most critical bills, including Constitutional amendments.
He suggests this is not just the end of the coalition regime but also the absence of opposition era. He points out that the rule book requires that in order to be recognized as official ‘Opposition’ in the House, a party would need to secure at least one-tenth of the total seats in the House.
The Congress with just 47 seats may lose the status of official opposition too. This is another aspect of change in the current election, he says.
Oswal emphasizes that these conditions provide an ideal ground for Modi’s stewardship to lead the country out of the current state of the economy. He has to set up a credible ministry and Cabinet, present a budget that stays on fiscal consolidation path and yet creates room for business confidence to revive and growth to be nudged upwards.
Modi also has to take up the pending reforms, including tax reforms (GST/DTC), energy pricing, SEB losses, and setting the ground rules for mining, land, labour and environment.
Modi also has to tackle the more medium to long-term development agenda such as including modernization and expansion of the transport network, industrial regions and manufacturing revival, urbanization and most critically agriculture.
The bottom-line of Motilal Oswal’s advice is that as Modi goes about his job (presenting the Union Budget etc), there will be great excitement and that will be reflected in the stock prices. If the Budget is investment-friendly (as it is expected to be) stock prices will go through the roof.
So, if we wait, it would be too late. Therefore, “this is the best time to invest in equities for medium to long term. A portfolio mix of growth and cyclical stocks would yield far bigger returns than debt or for that matter any other asset class” Oswal says with great confidence in his voice.