Dear Advisory Client,
I am releasing the monthly letter to you a few days earlier than usual as i have been thinking on how best to advise you on your portfolios going into 2019 general elections. Your portfolios have handsomely outperformed the market in all the volatility, indicating the strength of your portfolio. However, political risk can work against even the best of portfolios if market perceives that risk can be extremely high.
2019 general elections in India is a year away but this time around election risk is higher than usual. The Modi government had been given a strong mandate by the voters in the 2014 elections and there are concerns of dilution of the mandate in the 2019 elections. Dilution of mandate would mean that many economic decisions taken by the government could lack continuity, which could be negative for markets and economy.
Any new government formed without a strong mandate would also get the market to question whether tough economic decisions can be taken. However as seen over the years, the economy grows on the back of many other factors apart from government policies and India with its robust capital markets, financial system and private sector, performs well despite the government.
Hence we need to look forward even during volatile times of political risk (if high). Given political risk of 2019 elections and given that many domestic businesses are showing robust growth, global economy is showing strength and that a very significant indirect tax reform of GST has been implemented, i believe that an equity portfolio with a 6 year outlook, into the 2024 general elections would ride out 2019 election volatility as well as provide the growth returns required to grow your wealth to meet your future financial objectives.
We are working on a “India 2024 Portfolio”, which we will use to reposition portfolios of our advisory clients. As you all know, we have discontinued fixed rate subscriptions and are only taking in advisory clients whom we charge fees for assets under advise.
The India 2024 portfolio will be a very strong, core portfolio that will not be impacted by changes in government policies and will continue to grow on the back of their business models. The portfolio will be ready in a couple of weeks time and we will start the rebalancing process then. Your current portfolios are doing well and rebalancing will be done smoothly and over a period of time.
Do contact us if you have any queries.