As India gets ready for elections, many are watching closely to see how it will affect the stock market. The connection between elections and the market is quite interesting, as different parts of the market react in different ways to election results. Recently, Krishna Raj, who is the Founder and Chief Investment Officer at TVK Investment Managers, shared some thoughts on Fundirector about what this could mean for investors.
Krishna Raj pointed out that it's not easy for the market to predict everything that could happen during elections. With over a billion people voting, there's a lot of uncertainty that can't be fully priced into the stock market. He mentioned that while small companies' stocks have been going up, it might not be because they're doing better as businesses. He thinks there might be a correction coming for these smaller companies. On the other hand, bigger companies' stocks seem to be a good deal right now, especially considering how they're priced compared to small companies.
Foreign money flowing into the Indian market is also something to watch. Krishna said it depends a lot on what's happening globally, especially with things like inflation and bond yields in the US. If things stay stable, India could see a lot more foreign investment.
Krishna also talked about how the election results could affect the market. If the current government wins big, it could mean more foreign money coming in, which would boost bigger companies' stocks. But if the win isn't as big, there might be a pullback in the market, with smaller companies getting hit harder.
He also warned against assuming that companies supplying to government projects will automatically do well. He said we need to be realistic about this and not get carried away with assumptions.
In short, Krishna's advice is to be cautious and not get swept up in the excitement of the elections. By staying calm and looking at the long-term picture, investors can make smart decisions that will help them navigate through the ups and downs of the market during this election season.
