- Posted June 20, 2014 by
"Modi effects - As an investor, What I am expecting?"
BSE Sensex and NSE Nifty touched an all-time high after Narendra Modi led NDA got a clear mandate to form the government in India. The UPA government had left an ailing economy within which inflation, corruption and poverty formed the majority. PM Modi has a daunting task ahead of him to eradicate poverty, tame inflation and ensure no multi lakh crore scams take place. It has also been noted that under the UPA regime, infrastructure took a back seat and the value of Indian Rupee went in for a toss. The biggest challenge which is awaiting PM Modi is the growth rate of India. The growth rate of India had sunk to a new low in past decade.
Investor optimism knew no bounds after PM Modi was sworn in as the 15th Prime Minister of India. The sentiment could be measured in the form of the Bull Run prevailing in the markets. There is also a consensus that mid-caps and small-caps will be the best performers compared to the blue chip ones. In order to revive the economic growth rate it is necessary to bring about revolutionizing reforms. Before taking any kind of decisions, PM Modi set the ground rules in the form of “Minimum Government, Maximum Governance.” Sectors which are immediately likely to gain traction under the NDA regime are: Infrastructure, Defense, and Oil & Gas.
Immediate effect on Sectors:
Approval of Infrastructure Projects
Infrastructure sector is one of those sectors on the back of which India’s economic growth depends. Under the UPA regime nearly 570 major infrastructure projects worth Rs 7.9 lakh crore were submitted for approval, however, nearly 277 projects were delayed for some reason. The delay in approval cost the government an extra Rs 1.4 lakh crore. In order to increase employment and kick-start the economic growth Modi government plans to introduce FDI in infrastructure. This step will enhance the inflow of capital and unemployment will be taken care of. If one invests in the infrastructure sector with 3 years in view, one can expect decent returns.
FDI in Defense
Advance weaponry and latest technology to our defense sector is long overdue. With neighboring countries breaching the Line of Control now and then has made it essential for the Indian army to be equipped with state-of-the-art weaponry systems. Introduction of FDI to the defense sector will leverage the sector to its required technology and latest weapons. Apart from this, introduction of FDI is also likely to generate employment to up to 2 million people. Investors can invest in defense companies with a medium to long term view.
Oil & Gas Verdict on July 1
Oil & Gas has been one of India’s main concerns today. With the ever increasing price of oil & gas India’s inflation problem has always been on the rise. Additionally, this is likely to increase the crude prices and Current Account Deficit of India. Currently, the government is looking forward to revise the gas prices on July 1. Currently, the oil & gas sector is hugely influenced by the ongoing war in Iraq. If the war continues to persist, then India’s subsidy will increase to a great extent thus affecting the oil & gas companies and Current Account Deficit of India. But if the war is nearing an end, then one might see rebound in the Indian share market, especially in the oil & gas sector.