What to Expect from Share Market with Modi Govt 2.0?

As big economic challenges await Modi 2.0, investment expert Basant Maheshwari explains what the government must do in the given circumstances.

In an interview with The Quint Maheshwari throws light on what should be the economic agenda of Modi’s second term.

What Would Be Modi 2.0’s Agenda?

He explains that from the perspective of share market and economy the first agenda should be to do something for the middle and lower middle class, who so far has not been able to understand why he does not have sufficient income.

It is necessary to provide fiscal stimulus to them either through tax cut or some encouragement, he adds.

“There is one specific announcement that can be made which would not harm the government which is that LTCG (tax) can be removed. Since they made no money through LTCG (tax), it can be removed. Apart from that, the market does not require anything from the government. All they need from the government is to ensure the economy grows by 6.5 to 7%. This government would be able to do so as they would have control in Lok Sabha and Rajya Sabha. The market does not need any special treatment. If work functions normally then there would be no trouble.”

With respect to investment, Maheshwari says focus on consumer and finance is the key. People should refrain from investing in infrastructure for now. Owing to the troubles companies like Jet Airways and IL&FS are facing, investment in the government banks should also be avoided.

Investing in Which Sector Would Prove Beneficial?

“We often say that there are ‘two and a half sectors’ for investment. One sector is banking – private banks, second is consumer, third is IT or Pharma. There are not many options.  What would happen now is that there would be spending in infrastructure and people would purchase infra-companies. But purchasing would become difficult as most of the companies have funding tied up. There should be focus on consumer and financials.  If there is growth then there is no problem if their earnings are increased then the share value would also increase.”

What Sectors Should Be Avoided?

“First government banks should be avoided. Jet Airways and IL&FS are facing issues. There were other issues as well but it did not make headlines due to elections.  Government banks can face trouble. Some top-end government banks  are a good option.  Infrastructure should be avoided. Those small and big caps that work with an untested  business model should be avoided. When there is 8% GDP growth everything is acceptable but when GDP is 6.5 to 7%  and there is problem in the world  in regards with US-China trade war and monetary policy. As per IMF also they  are cutting growth globally. Hence it is advisable to  stick to the best quality companies. This is not the time to make a risky move.”