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!
State elections and the state of your investments
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 five to six 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.
RBI – Rehne Bhi do Investment ko
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.
What should you do?
Given the nature of your goals, which could be anything from a down payment on your home, five 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 must 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.