After all the noise about the national elections for the first half of 2014, the government has slowly tried to do two things at once i.e. 'take decisions' and 'appear to take decisions', in the first few days after assuming office.
Sure enough, we have a man from Gujarat, with very humble beginnings, has made it big to the national stage and is now the Prime Minister of India. His government is evidently trying to make all the right noises about policy, economic revival, resurrection of the job creation policies, leveraging technology and trying to run the government with the power of 'lean'.
But, what has caught my interest in the last 2 months is the manner in which almost every stock of every company that is headquartered in Gujarat has been going in only one direction in the last many months. And that direction, is a clear, decisive upward movement. I have wondered why.
Let me illustrate with a few examples of how the Gujarati stocks have move during the period 1 January, 2014 to 30 June, 2014:
- Arvind Mills is up 68%
- Adani Enterprises is up 69%
- Adani Ports is up 56%
- Adani Power is up 59%
- Axis Bank is up 48%
Before I proceed, let me add that I don't have any bias in selecting Gujarati companies starting with the alphabet A. It is just a random selection!
What I find very interesting is that, while many of the indices of which these companies are a part of may not have done as well as these stocks have, there is a clear Modi factor that has prevailed in the cases illustrated above. That only adds credence to the long-held theoretical belief that the stock market has a large part of market sentiment attached to it, irrespective of valuations, stock analysis and experts on television channels. And by the way, in the case of Axis Bank above, the bank is actually only registered in Gujarat, even though its corporate headquarters is in Mumbai!
The same experts that I refer to above, believe that there is more upside to the overall economy. I would only hazard a guess that many of these stocks from Gujarat will continue to have their upswing, irrespective of where the rest of the economy goes. It might just be worth it, if one were to buy into all these Gujarati-based stocks in the next 5 years of the current government!
On a more serious note, if such political sentiment is what is required for India to progress, have a wonderful capital market, and continue to be the preferred destination for every foreign institutional investor, I have no problems with it. Progress is what we need in order for us to realise the so-called potential that we are perceived to have in this century. Hope we make the first steps to realising our great potential in the coming 5 years.