Lok Sabha Election 2024: How Should You Rejig Your Portfolio If Modi-led NDA Forms Govt Again?


Feroze Azeez, Deputy CEO, Anand Rathi Wealth Limited On Lok Sabha Elections and Stock Markets

Feroze Azeez, Deputy CEO, Anand Rathi Wealth Limited On Lok Sabha Elections and Stock Markets

Feroze Azeez, Deputy CEO, Anand Rathi Wealth Limited, tells how investors may need to rejig portfolios if Modi-led NDA forms govt again

The Lok Sabha elections 2024 will be concluding on June 1. This once-in-half-a-decade political event is significant for most Indians since it touches their lives in more ways than one, particularly their savings and investments.

There is no denying the fact that the Lok Sabha polls are an important event when seen through the lens of investing; therefore, they impact people’s financial goals – marginally, if not substantially.

With the general election of 2024 underway and the incumbent Prime Minister Narendra Modi vying for a historic third term, investors are bracing themselves for increased market volatility. Even though the markets have already priced in the return of the current BJP government to power, still some market movements cannot be ruled out during the elections and their results.

In an interview, Feroze Azeez, Deputy CEO, Anand Rathi Wealth Limited, tells News18.com how investors may need to rejig their portfolios if Modi-led NDA forms government again.

1) How was the Modi government’s last 10 years from a stock market investor’s perspective?

India witnessed the highest-ever inflows from both foreign institutional investors and domestic investors during Modi’s 10-year stint. India has also improved its position within the MSCI emerging market index significantly to second place.

GDP growth

Real GDP in crores % Growth   Real GDP in crores % Growth
2013-14 9,801,370 2019-20 14,534,641 3.9%
2014-15 10,527,674 7.4% 2020-21 13,694,869 -5.8%
2015-16 11,369,493 8.0% 2021-22 15,021,846 9.7%
2016-17 12,308,193 8.3% 2022-23 16,071,429 7.0%
2017-18 13,144,582 6.8% 2023-24 17,290,281 7.6%
2018-19 13,992,914 6.5% CAGR 5.8%

Fiscal Deficit

Year Fiscal Deficit as % of GDP
2016-17 3.5%
2017-18 3.5%
2018-19 3.4%
2019-20 4.6%
2020-21 9.2%
2021-22 6.7%
2022-23 6.4%
2023-24 5.8%
2024-25 5.1%

Return of the broader indices in the last 10 years

Benchmark 1 Year 3 Years 5 Years 10 Years
NIFTY 50 – TRI 24.8 15.9 15.5 14.2
NIFTY 100 – TRI 30.1 16.7 16.0 14.8
Nifty Midcap 150 – TRI 54.1 26.9 25.7 21.7
Nifty Smallcap 250 – TRI 62.6 28.1 25.2 19.5

 Increase in FII and DII inflows – Strong FII and DII inflows

FY FPI Equity Inflows DII Equity Inflows
2014-15 111,333 -19264
2015-16 -14,172 78687
2016-17 55,703 29932
2017-18 25,635 114600
2018-19 -88 72407
2019-20 6,153 128208
2020-21 274,032 -132389
2021-22 -140,010 221660
2022-23 -37,632 255236
2023-24 208,212 209885

*INR crore

As we can see both macro and market have been in the positive, in the last 10 years.

2) What sectors gained prominence and provided more returns?

Sectors that have led the market in the last 10 years

Benchmark 1 Year 3 Years 5 Years 10 Years
NIFTY ENERGY – TRI 71.95 45.30 34.48 49.56
NIFTY REALTY – TRI 118.53 72.41 56.87 47.20
NIFTY METAL – TRI 58.33 32.93 44.32 35.77
Nifty India Consumption – TRI 39.50 28.02 25.77 34.59
Nifty Financial Services – TRI 15.02 14.57 15.90 34.48
NIFTY IT – TRI 21.73 12.28 23.90 33.72

(TRI: Total Return Index)

3) What are sunrise sectors that might get a push if the present government returns to power after the elections?

We are expecting renewable energy, space technology, artificial intelligence, electric vehicles, semiconductor and chip manufacturing apart from traditional infrastructure like railways and highways to do well.

CAPEX Data – Top 3 CAPEX spent sectors

Particulars (INR crores) 2020-21 2021-22 2022-23 2023-24
Road Transport and Highways: Capital 89194.82 113311.6 205985.94 264525.53
Railways: Capital 109323.69 117270.54 159256.15 240000
Defence: Capital 139924.91 144786.26 150895.98 167770.95

 PLI incentive sectors

Large Scale Electronics Manufacturing: Ministry of Electronics and Information Technology Rs 38,650 Crores
Automobiles & Auto Components: Department of Heavy Industry Rs 26,000 Crores
High-Efficiency Solar PV Modules: Ministry of New and Renewable Energy Rs 24,000 Crores
Advance Chemistry Cell (ACC) Battery: Department of Heavy Industry Rs 18,100 Crores
Electronic/Technology Products: Ministry of Electronics and Information Technology Rs 17,000 Crores

All these sectors outperforming will also significantly impact the financial services sector.

4) If the Modi government comes to power again, what addition and reduction would you suggest to investors in their portfolio?

Investors should not build portfolios based on short-term market conditions and think about wealth creation in the long term. One can begin planning by setting an asset allocation strategy in equity and debt.

Debt and Equity have a low correlation and a combination of these two assets can help in targeting a return of around 12% based on your horizon of investment. Equity MF has delivered an average return of 14% over a longer tenure and Debt MF has delivered approximately 6% return.

 Goal Tenure Equity Debt Average Return Average Risk

(Std Dev)

Long Term (Greater than 5 year) 80% 20% 12.4% 10.7%
Medium Term (3-5 years) 70% 30% 11.6% 9.6%

Under equity take exposure in different market caps exposure to create a balance at a portfolio level

Large Cap Mid Cap Small Cap
50-60% 20-30% 20%

Invest in diversified categories in equity – Analyze whether the fund’s strategy aligns with your investment goals. Create a diversified basket of mutual funds. This is where category selection plays a huge role.

Category Large Cap Large & Mid Cap Midcap Fund Flexi Cap Focused Multi Cap Small Cap Contra Dividend Yield
Percentage of funds outperforming benchmark 33% 41% 42% 40% 42% 43% 71% 47% 48%
Percentage of funds outperforming Nifty 50 37% 41% 46% 40% 42% 42% 47% 53% 47%
Avg. Alpha to Nifty 50 by outperforming funds 3.02 4.98 6.88 6.04 5.20 7.42 12.81 5.12 4.48

Debt Funds: Opt for TMFs and Gilt funds the impact cost of debt MF from TMF category is lower when compared to other categories. The return differential of a debt mutual fund from TMF vs a debt MF from other categories is just 20-30 bps with relatively more stability.

Review and Rebalance: Revisit your initial investment targets set for different timeframes. Market conditions and life goals may have changed, so adjust your investment mix accordingly.

5) How do you see the domestic stock market in the next 5 years?

India’s GDP growth is expected to be around 7% per annum, and expected to continue to be the fastest-growing major economy.

 Earnings growth potential of the benchmarks

Benchmark Nifty 50 Nifty Mid Cap 150 Nifty SmallCap 250
EPS Growth FY 24 18% 38% 34%
EPS Growth FY 25 16% 11% 15%
EPS Growth FY 26 13% 25% 19%

Nifty 50 and deliver Nifty 100 are expected to 15-16% earnings growth in 2024-25 while the growth of Midcap 150 and Small cap 250 are expected at 11-15%. Indian corporate profits are on a healthy growth path across the three segments therefore the market outlook is positive.

Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.



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