How to Invest During an Election Year | Investing Strategy

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Today in less than 5 minutes, you’ll learn:

1. Investing during an election year (plus sectors we like)
2. Stock in Spotlight: The company that spent ₹7,000 crores on 'shopping'
3. Why HDFC Bank shares tanked 8% despite good results

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Investing in the New India

An election year has always been a happening time for both the country and its stock market. And 2024 will especially be a nail-biting one, given that 50+ nations will be holding elections this year.

That’s like half the world 🤯

Well, if you’re thinking about how to make the best of your investments and capitalize on multi-year opportunities during such a time, read on!

It’s always a good time before the elections

Historically, markets have given a decent return in the run-up to elections, although showing heightened volatility. By the way, you can learn to build a long-term, stable portfolio using this investment strategy. Here’s how Sensex has performed in the pre-election period over the past 11 such instances:

Source: Samco Securities

The period after the elections has typically not been that great though. Over the past 5 years, an average 6-month post-election return of 12% for the NIFTY50 has been recorded, vs. 20% in the pre-election 6-month period.

This year can be a different story though…

Investing in Modi 3.0

With the Ayodhya temple inauguration, MSP for farmers, ‘Indian tourism campaign’, and whatnot - the incumbent government is leaving no stone unturned to solidify their throne. Surveys too, suggest that Modi is likely to be the voter’s choice, yet again.

Assuming that Modi 3.0 plays out, we are especially bullish on 7 sectors. Let’s talk about 4 of them here:

1) PSU Banks: The first beneficiary would undoubtedly be banks. Merging of several small nationalized banks over the past few years has improved their overall size and power. This will not only strengthen the nation’s finances but help lift the prospects of rural India as well.

2) Railways: If you think the rally of railway stocks has already peaked, think again. Budgetary allotment to the railway sector has been increasing YoY, and the government is set to transform the entire railway infrastructure for the ‘new’ India, the hottest manufacturing hub of the world. Investment opportunities lie in both new rail lines, as well as the upkeep of existing ones.

3) Defence: It’s impossible to think of global leadership without considering the defence sector. Not only defence exports have risen 23x since FY14 to an all-time high of 16,000 crores, but the expenditure on procurement from foreign sources has also drastically reduced. Watch out for equipment & parts manufacturers particularly.

4) Urbanization: This is more of a theme than a sector. Per-capita income is set to increase and the number of ‘affluent’ Indians is projected to grow by 1.5x by 2027, creating new outlets for disposable income to flow. Businesses in leisure, jewelry, and premium brands within all categories would be the top beneficiaries of this trend.

Would you like us to talk about the rest of the 3 sectors? Hit reply and let us know!

Note that none of the above stock ideas are intended as recommendations. Do your own research before investing.

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