Politics may be fluid, but economics is still solid. Time to be somewhat greedy

Sure, India's political situation has turned somewhat fluid. However, its still remain rock solid. India's FY24 GDP is a robust 8.2%. Its foreign exchange reserves stand at a handsome $ 650 billion. Inflation is low and global oil prices seem to be softening. is expected to cut rates. have upgraded their India outlook. Monsoons are expected to be good. All of the above will ensure that the Indian economy remains resilient. Sooner rather than later, this will trickle down to growth, a key driver of the stock markets.

Then, there's the point of fund flows into the market. India's retail investors are thronging the stock markets like never before. New demat accounts are being opened at the rate of 3 million per month. Today, total demat accounts are just over 150 million. If the current trend continues, this figure will double in the next five years.

Monthly (Systematic Investment Plan) flows, which were at ₹8,500 crore in March 2020, today stand at over ₹20,000 crore. This phenomenon has helped the markets comfortably absorb huge FII selling in the recent past. In fact, it's quite possible that may use the current market correction to re-enter India, having missed out in the last 12 months or so.

So, what does all of this mean to the markets? As legendary American investor Benjamin Graham as said, "In the short run, the market is a voting machine but in the long run, it is a weighing machine."

In fact, there may well be a pun on the word "voting". The voting results have caused the Indian markets to turn into a voting machine. This means that over the next one year, there could be some derating of India. But such derating, if any, will be more than offset by corporate earnings growth of around 15%. In effect, expect muted returns over the next one year.

Now comes the "weighing machine" bit. Indian equity markets have delivered long-period returns of 14-15%. BJP not getting a majority should in no way alter this trend. Thus, I maintain my view that India's market benchmarks should double in the next 5-6 years.

Here's my message to new investors: Warren Buffett has said, "It's wise for investors to be fearful when others are greedy and be greedy when others are fearful." The current fluid has caused the markets to be fearful. I advise you to believe in India's solid economics and be somewhat greedy.