State Elections, the RBI and the State of Your Investments

News Channels today are working overtime. Barely have they paused for breath after news of the RBI Governor’s shock resignation, due to 'personal reasons' then they need to start covering state elections across 5 states in India. Results for state elections in Madhya Pradesh, Chhattisgarh, Rajasthan, Mizoram and India's youngest state - Telangana are being announced today.

Amidst all this hectic buzz out there, the BSE SENSEX had lost around 700 points yesterday and started almost 480 points lower, but has ended at around 190 points higher at the time of writing this article! So what does all this mean for your investments? Read on to know!

Elections do have an impact on investments, but for the very short term. For those of us who are saving for long term goals, which are 5-6 years or more away, following elections and stating our views makes a great chai time conversation with friends and colleagues, but other than that it has negligible impact on your long term investments.

Yes the markets will react and yes they will also correct themselves based on the fundamentals of the economy, rather than who holds the reins.

Mr. Sorbh Gupta, Associate Fund Manager - Equity has explained how election results have minimal impact on long term investments in his talk which was published on 26th October 2018. You can click here to watch it again, if you have not done so.

Says Arvind Chari, Head - Fixed Income & Alternatives of Quantum Advisors Pvt. Ltd (sponsors of Quantum AMC) on Mr. Urjit Patel's resignation as Governor of the RBI:

"This is apparently only the second resignation in the RBI's history which indicates that it is an unusual issue which the RBI-Government haven't been able to resolve, leading to the Governor choosing the 'nuclear option' of resignation. The government has to tread carefully here in dealing with this issue as the RBI is a sensitive institution and markets accord a great deal of significance to its autonomy and credibility.

Indian markets, Bonds, Currency and Equities will see a negative reaction in the short term. Given the impending state election results due tomorrow, markets would remain volatile depending on the outcome at the polls.

The focus would now be on the process of the appointment of the new RBI governor that the government follows especially with the next board meeting scheduled for next week. It is of critical significance to choose a successor whom the market sees as independent and trustworthy. In a democratic, parliamentary set up, no one expects the RBI to have complete independence; but the importance is always stressed on whether the RBI and its Governor are perceived to be independent."

While Arvind rightly predicts that there will an impact on not just the Bond market but also on currency, over the short term, the impact of this event, again should not affect your long term financial goals.

Given the nature of your goals, which could be anything from a down payment on your home, 5 years from now, or retirement 25 years from now – Stay focused on your financial goals and do not let these events divert you!

There will always be news that will sway the markets one way or the other, do not react to market news and change your investments to time the market. Every investment you make has to have an end goal in mind - focus on that goal alone and ignore the noise that may create short term blips in the market (take today as a prime example, the markets started around 480 points down but ended in the green) but overall should have negligible impact on your overall investment and asset allocation.

Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

Mutual fund investments are subject to market risks read all scheme related documents carefully.

Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

Above article is authored by Quantum.

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