“India needs a better leader,” says a Fund Manager of Indian origin working with one of largest US based hedge fund. “Rahul is not going to make much of a difference and Kejriwal prefers protest over power,” said another leading investor who works in Singapore. We figured that if we were to put our NRI-based friends into baskets based on their political allegiance, they would roughly fall equally into two baskets
a) Kejriwal fans:
They do like Modi for his development agenda but they prefer Kejriwal as the underdog outsider who can shake the system and eliminate corruption making life better for citizens.They like his handle on data, his ideas, and zeal to reform things at a lightning pace. They have fond memories of his 49-day rule in Delhi. We get the feeling that they like the sheer courage Kejriwal showed in terms of launching a political party, taking on Delhi CM and finally winning the elections. They like the bravado quite a bit.
b) Modi Fans:
They are absolute fans of Modi. He has generously showered his attention on the NRI diaspora as is evident from his cheerful demeanour on the Pravasi Bhartiya Divas, 2014.
Facebook: the aggregator of sentiments
Besides conversations on weekend get-togethers, Facebook is definitely the biggest compiler of public sentiment in one’s friend circle. At least for us, Facebook has become a political portal instead of a social network. Most of the items that land in our feed these days are on politics,though last few days were ruled by Yuvraj Singh’s dismal performance as well! As they say, Indians love their Bollywood and Cricket, but we think we love our elections even more. At least this time. Possibly,one of the catalysts for this deep political involvement and awareness over last 1-2 years has been the rise of India Against Corruption movement and the consequent meteoric rise of AAP. However, as we noted above, sentiment about AAP has changed from universal adulation to a polarizing binary — people either love them or hate them.
Kejriwal’s loss is modi’s gain
Kejriwal’s loss has been Modi’s gain as far our interactions suggest. While Kejriwal seems to have lost support post resignation, Modi’s star has been steadily rising. A friend of ours in Singapore who hails from Gujarat had animated discussions with Ground Zero regarding the development that has been done in Gujarat and expressed hope that Modi can do that at the national level given an opportunity. Another close friend takes pride in discussing that he has lived in Gujarat (though only for three months) and that we should go and visit the state to understand how the government machinery functions in Gujarat and how that is the way it should work across the country.
How investors are taking it
While the market’s rapid ascent has taken many participants by surprise, as far as Ground Zero gathers , investors seem to quite like Modi. The discussion about Modi always veers towards how for the past few years India has seen a gigantic scale of economic mismanagement, massive corruption and policy pause that hurt economic growth, jobs, corporate profits and hence investors as well. One of Ground Zero’s friends, who is also an institutional investor, highlights the track record in Gujarat in terms of development and growth and puts forth an argument that this is what we need at the central level as well. Another client of us was all praises for e-governance initiatives highlighted in BJP’s manifesto.
How about investing?
In terms of portfolio positioning, we think there are a few investors who are cautious on election results due to prior unreliability of polls. These investors are little careful about adding beta to their portfolio. It also seems to Ground Zero that quite a few participants missed the rapid rally as they were caught overweight on export-oriented defensives or were underweight India in general. These investors are are now torn between whether to enter at this time when early entrants might be looking to sell their positions.
They are concerned that they would just be providing an exit to such early entrants and would be getting in at a price where incremental returns would become difficult. The bullish investor believes that a stable government verdict isn’t yet priced in because retail and domestic mutual funds do not seem positioned for a positive election outcome. If outcome is indeed positive, this inflow could keep markets propped up.
All investors want a government that moves fast on investment related decisions and controls the fiscal situation with a rein on various subsidies. We also noticed something interesting about investors who like Modi — when we pointed out that in terms of election manifesto, BJP is more vague and Congress is more specific, we got a response that BJP has done this deliberately so as not to get caught off guard on some specific promises. That definitely is a pragmatic political approach and as has been widely argued, Modi does have a strong following outside India as well.
Not to mention…
While a Modi wave in India has been well covered by media, here is our off-the-beaten-path take on it — the following picture was in the house of one of Ground Zero’s friends in a village in UP – the battleground state. The village is 15-20 km away from a major road and the nearest town, Deoband, has a population of just 80,000. In that remote village, a picture of Modi on the wall of a farmer’s home says quite a lot.
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