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

It’s the economy, stupid, says Agrawal, who built Motilal Oswal Financial Services Ltd. into a $2.3 billion firm. In the veteran stock picker’s view, it doesn’t even matter who becomes the country’s next leader, because the economy will grow anyway. And that means, quite simply, that India’s equities are a buy.

“Whatever you do to the economy, growth doesn’t dip below 5.5 to 6 percent,” Agrawal said in an interview in Mumbai. “A recession in this country means 5.5 to 6 percent growth.”

India’s benchmark equity gauge has slid 6 percent from a record in January as the global selloff hit sentiment already weakened by the government’s move to tax stocks gains. Adding to the concern are cracks in the popularity of Prime Minister Narendra Modi’s 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 that’s almost doubled the nation’s stock values since Modi took office in May 2014, UBS Securities India Pvt. said in a February note.

“It doesn’t really matter who comes to power,” Agrawal said. “Politics per se hasn’t constrained profitability of companies.”


Beating China

Agrawal’s optimism is shared by the central bank, which last week forecast the economy to expand 7.4 percent in the year ending March. That exceeds the 6.5 percent growth projected for China in 2018. India’s GDP grew at 7.2 percent 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 can’t 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 he’s positive about Indian equities because of the country’s huge and young population, the size of the entrepreneurial class, and the surge in companies in the services sector. He’s so optimistic about the nation’s new economy that he’s invested — along with partner Motilal Oswal — about $400 million in funds run by the firm’s 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.”

“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.”

India’s economy has grown at about 10 percent 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.



By Nupur Acharya