Arjun Parthasarathy has spent 20 years in the financial markets, having worked with Indian and multinational organisations. His last job was as head of fixed income at a mutual fund. An MBA from the University of Hull, he has managed portfolios independently and is currently the editor of www.investorsareidiots.com . The website is for investors who want to invest in the right financial products at the right time.
Unfortunately the structure of financial services industry in India is not conducive for institutional investor activism. Maruti Suzuki itself is a good example of the incestuous nature of the financial services industry.
Can Modi take bold, strong decisions to get the country back on its feet? Will his coalition partners allow tough decisions? Will the economy react favourably to tough economic decisions? A lot of these questions need to be answered for the markets to stay convinced on India.
The question is, what if markets are disappointed on election results? Given higher levels on the Sensex, Nifty and INR, all should fall sharply before stabilizing. However until then it's the positive sentiments that will drive the markets.
Life insurers are regulated by the IRDA and have strict capital norms. Most of them have partnerships with big global insurers. Hence credit risk to a private sector insurance company policyholder should ideally be low. On a pure credit risk aspect on insurers, LIC does not have a big advantage over private sector insurers.
Given the positive factors and the uncertainty on the economy and elections, my opinion on whether you should buy equities going into the elections is yes, you should buy equities but be stock and sector specific and be prudent on weights of each stock in your portfolio.
Stable outlook for the rupee coupled with high interest rates will prompt arbitrage flows leading to the rupee strengthening against the dollar. The rupee's appreciation will further encourage arbitrage flows, a self fulfilling cycle that could take up the value of the rupee by a good margin.