NaMo Returns: What It Means for Your Portfolio

30th May 2019 will remain a historic day in India’s history when Prime Minister Narendra Modi – led government embarked on the next 5 years of Reforms. In 2014, when Mr. Narendra Modi first became Prime minister, Sensex was at 23,905, which grew up to 39,714. This translates to a CAGR of 12.14% including dividends.

NDA 1 is done and dusted

It’s time to look forward to the next 5 years. For starters, Modi government will have to focus on improving macroeconomic indicators.

“But what does this mean for your investments? How can you direct your portfolio to make the most of the next 5 years?”

BJP’s manifesto gives an insight into what the next 5 years will look like.

The two major commitments which the Modi Government will work are:

• Doubling Farmer’s income by 2022
• Housing for all.

This will increase the disposable income in rural areas. It will act as a boost to the FMCG sector which saw a lackluster quarter because of reduced demand. Financial companies will continue to grow because of increased rural income.

RURAL INFRA

Improving rural infrastructure is high priority for next 5 years and hence Agri – Allied sectors like commercial vehicles i.e. tractors, seeds, and fertilizers, will be in focus for the next 5 years.

Infra development will require huge investment. Modi Government plans to invest a whopping 100 Lakh crore for Rural Infrastructure by 2024. With this investment, the aim is also to reduce cost of capital. This will increase private spending in infrastructure, which in-turn benefits other sectors like Banking & Finance, Construction and Metals.

This manifesto is an extension of work done under Modi government for last 5 years.

Let’s have a look at performance some of the thematic funds over this period. Three major themes which were in focus are Banking & Financial, Consumption and Infrastructure. We looked at three funds from each theme based sector with the highest AUM.

For, next 5 years, we believe these themes will be in focus, Based on our analysis of the new manifesto, these can outperform to create alpha in your portfolio.

Summary

One thing which is important to note is that thematic funds also have inherent risk because of concentration in one particular sector. From the entire portfolio, exposure to Thematic/sectoral fund should not be more than 20-25%.

If you would like to increase the exposure, it will depend on your ability to analyze and understand the market cycle, if not then take help of the investment advisor to build and manage your portfolio.