Come May, Modi and Monsoon will shape future course of stock market.
Monsoon season is considered to begin from May 15, while election results will be out on May 16. While most of pre-poll surveys predict victory for Narendra Modi-led BJP and NDA, monsoon is expected to be below average. So, which M – Modi or Monsoon -- will impact the market more?
It is sustainable. We are probably starting to see beginning of bull market as predictions show a stable government coming in. I am of view that, at present, the market is at lower levels.
For example, the market was at 21,500 in early 2008. From that level, if we apply annual inflation at 10 per cent, the market is currently at 11,000. Historically, global market delivered 15 per cent annual return over a period of 150 years to equity investors. So, anybody entering at the top of the bull market would get an opportunity to exit at average rate of returns over a longer period of time. Expected rate of return in India should be minimum of 15 per cent otherwise no point of investing in India.
If somebody has invested at that level in 2007-08, today the index should have been 51,000 points and only that level would give 15 per cent of return. If you look at the market in this way and it sustains post election, you will have tremendous upward momentum and that will continue for next 4-5 years, I am also of the view that market will touch 60,000 in four years time.
Which M -- Modi or Monsoon -- will be important in shaping the market?
Although monsoon is very important for the economy and last year we had very good monsoon, but market did not touch a high. After monsoon, market and economy do not necessarily move in same direction unless there is a drastic situation such as major drought. That situation has not been predicted. As far as stock market is concerned it actually looks at rather long-term scenario rather than the current monsoon.
Current monsoon is important if the market was at much higher level. Today’s market, possibly after election if there is a stable Government, that will instill confidence among the investors. For example, there was the IPO of Wonderla Holidays--it was subscribed 38 times. I am of the view that monsoon will not have that much of impact on the market as the stable government will discount the impact of the monsoon.
Do you see primary market picking up?
Primary and secondary market move in lead lag kind of relationship. First, the secondary market moves and after some time primary market does so.
Do you expect securities transaction tax to be removed by the new Government?
My view is that STT removal is unlikely to happen. STT is likely to become a non-issue over a period of time when market returns are high. If investors are making money, they don’t mind giving 0.25 per cent STT on transaction and even the foreign investors won’t mind.
What are new offerings from your company for the retail investors?
We are planning to focus on Rajiv Gandhi Equity Savings Scheme. At the same time, we are also planning to bring lot of technical resources – 12 per cent of our turnover is coming from mobile platform and 50-55 per cent from online.
We have launched systematic investment plan for equities. This is for those having fixed monthly income and those who want to participate in market. Our focus is on youth who has got employment and wants to build a long term portfolio. These are the people who use smart phone. So, we want to provide them a technical platform to invest even ₹ 2,000 every month from any where. Technology aided by convenience will help the investors.