Why I Want Indian Elections To Fail This Time?

Don’t get me wrong guys. I am not against our country.

If one was to take the current national mood (as suggested by opinion polls) and mediaproduced content as dependable indicators of election results, there are decent chances that India might get a strong and stable government.

India Elections 2014 Voting Machine
Indian Elections 2014 – To decide course of markets for next 5 years

Who would it be?

I don’t know. And atleast for this post, its immaterial which party or alliance it is.

But before I tell you why I want Indian elections to fail, I want to caution everyone.

What I Am Concerned About…

In last 6 months, Indian stock markets have made new highs and moved up from 19,000 to a new high of more than 22,000. This means a good 15% increase in less than 6 months!!  And if one thinks carefully, it has only been in last 6 months that various political parties have become ‘electionally’ active.

Fundamentally, almost nothing has changed apart from Rupee appreciation.

So as far as I am concerned, this rally is fueled mostly by hope and people’s expectations.

And there is nothing wrong in being hopeful and optimistic about a strong leader. But to think that someone has a magic wand and would change everything with the word go is like… being very unintelligent.

People have already started talking about newer and bigger targets like 40,000 for Sensex. 

And headlines like the below ones have become very common
India Elections 2014 New Headlines
Common Newspaper / Online New Site Headlines
So guys..

Let’s be a little rational, if not wise.

Stock Markets are riskier when moving up. And as of now, markets are moving up pretty fast.

A number like 40,000 or 42,000 is not unachievable. And it is possible that it might happen over the next five years. But stock market history bears witness that whenever things get a little too optimistic, and markets run up without any improvement in fundamentals, there is a reversion towards the mean, which means…


When will this happen?

I don’t know.

Will this happen?

Of course.

And gods forbid, if the new government is unable to deliver on its promises within the first year, the markets would definitely overreact and start grinding down.

So..

Why Do I Actually Want These Elections To Fail In Giving A Clear Majority To Anyone…

Once again, don’t get me wrong. I am not against our country. But I am an investor too.
Anyways the government would be formed. But in case there is no one with clear majority, then markets would not take this as good news.

And that is what I like. Markets go down because of bad news or because of absence of good news. So to bring sanity back to Indian markets, it would be a good correction to have. And for long term investors, what better can happen than a decent correction?

I will get to buy stocks I like & want to buy in high numbers but at lower prices. And to be honest, I regularly pray for stock market corrections.

These are my views and you can throw bricks on me for these thoughts about 2014 election results. I accept all kinds of bricks. 🙂

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2014 Would Be A Good One For Stocks. But…

I was browsing through morning newspaper when the following headlines caught my eye –

Indian Mid cap stocks
And another similar optimistic one was present in the online edition of the same newspaper –

2014 to be a hot year for equities” (source- Economic Times).

The first thought which crossed my mind after seeing such eye-catching headlines was that everybody is turning bullish these days. So by being cautious as usual, was I being stupid?

And to tell you the truth, I have personally observed that during last 6 months or so, people have become more comfortable, or rather more ‘confident’ talking about investing and ‘making-money’ in stock markets. So is it that just because everyone else one has started talking about it, and business channels are discussing number like 25,000 for Sensex and 7500 for Nifty, does it mean that 2014 would a good year for stock markets? To be brutally honest with you, I don’t know. And please understand that in this world, Nobody can predict anything with 100% confidence.

But remember, there is a very thin line between confidence and over-confidence. And one generally does not realize when one crosses that line.

And with current PE close to 18.5 (Market PE details), the Indian markets are not very cheap. There may be some sectors which might be actually cheap. But overall large cap space is not that cheap as the headlines may make it appear like. So take a sensible call, weigh your options and your risk appetite. There are some big newsflow scheduled for 2014 (general elections, new banking license). Keep a sensible head on your shoulders and be greedy when others are fearful.

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5 Thoughts For Investing In 2014

The year 2013 has ended. And today being the first Sunday of 2014, I have luckily got some free time to sip a cup of hot coffee and to think about what might happen in 2014, and how it would affect stocks, investments and my portfolio.
 
coffee 2014
First Sunday Coffee || 2014
 
Indian Markets Are Not Cheap
With large cap indices like Sensex and Nifty50 trading at 18-19 times earnings, it is quite clear that as of now, Indian markets are not (very) cheap. [Read more about how to know whether Indian markets are trading cheap or not here]. Experts might tell you that current PE ratios are 14 and 15. But that is because they are considering earnings in 2015 and 2016. Not 2013 and 2014. So, don’t believe too much of what experts have to say. And if you like watching business channels like CNBC, then do it for just one reason. 😉
 
Keep Cash At Hand
If the markets are not cheap, then it’s a good idea to stay out of markets for the time being and start hoarding cash. Because it is only a matter of time, when markets would once again regress towards the mean and correct (valuation wise) and give some tremendous buying opportunities. And you don’t want to run out of cash when there is a distress-share sale. Isn’t it?
 
Invest In Business, Not In Politics
With Aam Aadmi Party’s surprising win in Delhi, it seems that everybody has become an expert in politics. And with BJP and Congress ready to fight it out in the coming elections, it is inevitable that someone, somewhere would recommend you to buy shares of companies which might benefit from either party’s coming to power. Though it may seem like a good idea to buy stocks of companies which are friends with possible election winners. But this can be risky. You can never be sure of who is going to win these elections. Did any one of us had even a slight idea that within 6 months of active politics, Mr Kejriwal would become Delhi’s CM? So the point which I am trying to make is that almost anything can happen in politics. It is better to buy shares of a company because its business is good and its shares are available at a good price. And not because its owners are friends of Prime Ministers-To-Be. Period.
 
Beware Of New Banks
With only a few months remaining before the new banking license are awarded, its obvious that one would become quite excited about this episode and try to guess the names of new banks before RBI does it. Though it seems and is highly possible that prices of applicants who get the new banking licenses would soar, the fact remains that banking as a business is not easy. And though India is under-banked, it is also true that the existing banks are pretty strong and would not allow new players to take their turf easily. So, I am not saying that don’t buy stocks of new applicants. I am just saying that it’s a bad idea to become over excited about the whole issue. Just be fearful when others are greedy. Remember Reliance Power  and you will understand what I mean. 🙂
 
I Am Not Investing To Beat The Index
This thought is something which has always been one of my key decision makers. I have always believed that money should be available when one needs it to be. And that should be the whole purpose of investing. So, it does not matter whether I am beating the index or not, as long as I am able to fund my needs, desires and at times, greed(s) 😉 So beating the index would be great, but I am not Warren Buffet, and I am not going to loose even one night’s sleep over it.
 
So that’s it. These were some of my early-morning-first-sunday-of-new-year-thoughts :-).
 
I would be happy to hear your thoughts as well as your arguments against my thoughts. It’s always better to debate the initial (raw) thoughts rather than older (established) ones. So do let me know…
 
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