Markets

Stock picker who built $2 billion empire unfazed by India polls

By Nupur Acharya

Indias stocks are falling. Investors are worried about upcoming elections. But Raamdeo Agrawal has a message for them: forget about all that noise.

Its the economy, stupid, says Agrawal, who built Motilal Oswal Financial Services Ltd. into a $2.3 billion firm. In the veteran stock pickers view, it doesnt even matter who becomes the countrys next leader, because the economy will grow anyway. And that means, quite simply, that Indias equities are a buy.

“Whatever you do to the economy, growth doesnt dip below 5.5 to 6 per cent,” Agrawal said in an interview in Mumbai. “A recession in this country means 5.5 to 6 per cent growth.”

Indias benchmark equity gauge has slid 6 per cent from a record in January as the global selloff hit sentiment already weakened by the governments move to tax stocks gains. Adding to the concern are cracks in the popularity of Prime Minister Narendra Modis Bharatiya Janata Party before state polls starting in May. The fear for some is that Modi may not win a second term in 2019.

The aura of invincibility around Modi appears weakened after a tough fight in his home state of Gujarat, defeats in three key by-elections in March and the exit of an ally. A change in political expectations may undermine a rally thats almost doubled the nations stock values since Modi took office in May 2014, UBS Securities India Pvt. said in a February note.

“It doesnt really matter who comes to power,” Agrawal said. “Politics per se hasnt constrained profitability of companies.”

Beating China

Agrawals optimism is shared by the central bank, which last week forecast the economy to expand 7.4 per cent in the year ending March. That exceeds the 6.5 per cent growth projected for China in 2018. Indias GDP grew at 7.2 per cent in October-December, the fastest pace in five quarters.

Stocks have been whipsawed for much of this year, but for Agrawal, that would happen even without the election concerns.

“There will definitely be volatility in the short term but we cant blame it only on India elections,” he said. “If the U.S. market collapses or oil surges it will impact us even if you cancel the elections.”

Agrawal says hes positive about Indian equities because of the countrys huge and young population, the size of the entrepreneurial class, and the surge in companies in the services sector. Hes so optimistic about the nations new economy that hes invested — along with partner Motilal Oswal — about $400 million in funds run by the firms wealth management unit.

Doubling GDP
“All new businesses are in the private sector and the old ones are with the government,” Agrawal said. “The future of India is with the new corporates.”

Indias economy has grown at about 10 per cent in dollar terms since the turn of the century, Agrawal said. “This is not being talked about. At this rate, in the next seven to eight years, we can go from a $2.5 trillion economy to $5 trillion.” The doubling in the GDP size can spur a threefold jump in per-capita discretionary spending by 2025, he said.

Given the intrinsic momentum in the economy, “there are very few things that are dependent on the parliament other than executing policy and collecting taxes,” Agrawal said.

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