Expect rally after June 4, time to diversify, says ex-Franklin Templeton analyst

Lotusdew Wealth offers smallcase portfolios designed by Abhishek Banerjee, who has over a decade of experience in asset allocation

Lotusdew Wealth offers smallcase portfolios designed by Abhishek Banerjee, who has over a decade of experience in asset allocation, portfolio construction, and quantitative investments.

Previously, he worked as a senior research analyst at Franklin Templeton in the Systematic Strategies Group. He holds a degree in Computer Science Engineering, an MBA from Rotterdam School of Management and Duke University's Fuqua School of Business, and is a Chartered Alternative Investment Analyst.

Possibility of a 5-10 percent rally in the equity markets post-exit polls or election results?

Possible. But there are some tail risks. A super majority or BJP winning less than a majority will surprise the market given the current narrative.

What happens if either turns out to be the case?

Markets mostly worry about policy continuity and the laws under which they are governed. More uncertainty will lead to a greater markdown in asset prices. In the case of a super majority, there can be uncertainty about what large reforms the NDA plans and how disruptive they might be to current policy thinking. A weak showing by BJP will signal fatigue with the current narrative.

Why is there weakness now?

There is less liquidity as many investors are waiting for the event to play out before they plunge in.

Do you think the coming five years will be better than the previous ten years?

India has a lot of momentum. A lot of things would have to go wrong to make the next five years worse. However, the real risk is contagion from global issues, including wars, energy transitions, or changes in tariffs. For instance, if the US wants to protect IT imports from India and imposes tariffs on IT services to create jobs in the US, such risks are unpredictable until they happen.

Which sectors should we focus on assuming a status quo post-election?

Manufacturing, financials, and metals. More metal will be consumed in India in the next 10 years than has been consumed in the last 50 years.

What is your investment strategy after June 4?

Use near-term volatility to average out prices for longer-term investments. Tactical exposures to preferred sectors can be quite risky. Prefer diversified sector exposure over narrow sector exposure.

What do you prefer - PSU banks or private banks?

Prefer PSU banks as they have more levers to unlock efficiency gains. Private banks are already efficient and well-managed, while a well-run PSU bank has structural advantages in terms of reach and staff attrition, which makes relationships lasting. Banking is a relationship-based business. An efficient PSU bank is a better bet than private sector banks, which face extreme competition for clientele.

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