Podcast Transcript

Now that the noise and din have settled down a bit, let us try and think of what the future holds for us.

In this podcast, I try to look at three things.

  • Leadership
  • Lead indicators and
  • Long-term investing.

Leadership matters the most. Whether for the government, a company or the stock market, who leads counts. So, the fear right now is whether the choice of leadership for the government may not be the best one. This fear, although possibly can come true, is still at a level of conjecture. While who becomes the leader is still open, what the leader can do is not.

That really is the story of Indian leadership. We are on the ascendant, and rapidly so, on governance standards. Be it in the government, a company or the stock market, the need to govern better is a compulsion. Expectations are riding high always and any let down is harshly punished. So, while leadership concerns are normal, whoever leads has no choice but to deliver on expectations. The leader must give everything he got. Such is the competitive nature of our country. This reality has not dawned on most of us.

Now to the lead indicators. The usual lead indicators for an economy are GDP growth, inflation and interest rates. These are essentially rear-view mirror images. What they will be in the future is largely guesswork. Often, we can expect more, and be let down.

But, if we look at other indicators like IIP, PMI data, CPI and WPI, we start to get a sense that things could well be improving. After a long phase, we could see our economy growing faster and in a secular manner. No, I am not making any political pun here.

What I mean is, there is clear positivity in capital goods, power generation, food production and services growth. As our interest soften and oil prices remain subdued, we could see a strong push in 2019 towards economic growth. The reforms like GST and digitisation of business will see the formal economy expand significantly faster in the next five years than they did in the last five. The tough decisions and hard work of the past five years are sure to hit a purple patch.

So, is it a good time for long-term investing? If so, where should one invest?

Clearly, the economy is heading into an exciting growth phase. Betting on top-down growth makes great sense. I would not advocate excessive exposure to smaller or unknown companies, especially ones of lower pedigree.

Bet on sectors you avoided earlier for lack of growth. Power, steel, natural resources, domestic services, capital goods and engineering consumables are all going to be the winners of the future. Investors must be willing to gradually buy more of them and scale up as they stay volatile in the runup to elections.

The question is – how many are ready and willing to do what others fear.

But that is the ticket to leadership in your investing. To beat the herd, dare to be different. And show it in your investing.

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