Today is 19th July'2018 as I write this blog . 2018 year to date, the Midcap Index is down 14%. Thus, several Midcaps have seen prices fall by over 25% in a matter of just six months. Though Nifty and sensex are at there all time highs , the investors in general are worried as they see a decline in the value of there stocks and mutual funds portfolio . The reason being the market rally now is primarily due to the rise in price of only few large cap stocks like HDFC Bank , HDFC , Bajaj Finance , M&M , Eicher motors & Maruti . Therefore this is the first time in indian history that inspite the rise in sensex and nifty the investors are worried .
So, what should the investor do in such a situation ?
Firstly , I want to emphasize that politics or political conditions in the country do play a role in the short term bur over the long term political affect do not effect the stock market conditions or stock price . We have seen different governments in the past but economy of the country is growing at its own pace . I do not know which government will come in center in 2019 elections , BJP or Congress or someone else but presently the kind of changes that I am seeing in India for the first time , that is making me a lot more positive for the first time .
India's GDP now is 2 -2.25 trillion dollars , taking a very nominal GDP growth rate of 10 -11 % , we will be doubling our GDP in 7 -8 years that's confirm . When this will happen a lot of wealth creator stocks will come for the first time , which we have not seen up till now , that means India will add another India in its portfolio . When our GDP will grow from 2 -2.25 trillion dollars to 4-4.5 trillion dollars we will see that , there are lot of the companies which have created wealth disproportionately high . In last 15 years we have seen a lot of companies have created wealth disproportionately like HDFC , HDFC Bank , Eicher , P&G ,Kotak Bank , Britannia , Bajaj Finance ,HUL ,BOSCH ,Page etc . I feel in the next 7-8 years , there will be much more wealth creating companies , but at the same time I want to stress that with one wealth creator company there are ten wealth destructor companies also , so if you have created one wealth creator than there are tens of wealth destructor companies like Lanco ,GVK , Geetanjali , Unitech etc . In this market the strategy which works well in stock selection is bottom up approach , those who will be able to pick these stocks will be the winners of next phase .
There are three structural changes that have taken place in the last 2-3 years , which cannot be reversed now whether Modi Govt. comes to power in 2019 or not .
1. Insolvency and Bankruptcy code (IBC ) - First time in India there is fear in the mind of promoters of companies after the implementation of IBC , that if they will not repay Loan due amount to financial creditors within 180 days of due date the creditors can take the company to NCLT and company can be liquidated or can be handed over to financial creditors . This is taking place first time in Independent India .
2. Goods and Service Tax (GST )- Most of the businesses were evading TAX earlier , but after the implementation of GST . The tax reform will boost Indian economy and huge shift will be seen from unorganised to organised sector .
3. RERA - RERA was conceived to change the entire status quo of how real estate is designed , developed and sold in India . Real estate was the sector in India where most of the black money was used , so government intention was to curtail the flow of black money in real estate .It intends to put a check on fly-by-night players - both developers and brokers .
All these structural changes will give huge boost to Indian economy & will create huge wealth for investors .
Happy investing .
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