In these three-odd years, BSE Sensex hit a lifetime high of 30,000 from 20,000
Amassive 1,000 per cent surge in 120 stocks from October 13, 2013 till date, after Narendra Modi was declared BJP’s prime ministerial candidate is symptomatic of the bull power in the stock market that has reposed huge confidence in his government.
In these three-odd years, the benchmark BSE Sensex hit a lifetime high of 30,000 from 20,000. This reflects the continued confidence that the stock markets have had in the Modi government and its commitment to reforms. This kind of unflinching commitment of the market in a government is rarely seen, that too notwithstanding the fact that businesses were hit during seven weeks of demonetisation. BSE Sensex rally has been so huge at 50.8 per cent that the valuation of listed companies on the bourse has touched a colossal Rs 123.53 lakh crore making India the most profitable market for both domestic and foreign investors thus far.
Apart from continued streak in economic and administrative reforms, market seems to have rallied on political stability that this government has brought in under Modi as its mascot. BJP and its alliance governments in 13 states, top local bodies including key Mumbai and Delhi Corporations seem to have further led to a markets tango with Modi.
A huge thrust on infrastructure projects in roads, railways, waterways, ports and airports by front-ending billions of dollars of public spending has also pepped up market sentiment. It’s not just equities but debt, commodities, currencies, bullion, metals and retail markets that have experienced buoyancy across asset classes making big bucks for investors. FC lead story in its Wednesday edition succinctly explained how investor returns were a huge 19 per cent considering the year to day yields and appreciation in rupee value.
Most interesting is that Indian stock markets performance has been a full head above most emerging markets and developed countries including US, Brazil and China. This has not only lent credence to Modi’s reform programme but also his governance style.
Markets are a function of events, liquidity and earnings. The ongoing rally has been driven by FPI and domestic liquidity. Add a strengthening rupee against the dollar and you have a win-win formula for foreign portfolio investors. Normally an incumbent prime minister is bound to lose steam midway, but under Modi there’s much more that markets expects in terms of output. Recent triumphs in Uttar Pradesh, Uttarakhand and formation of BJP-led governments in Goa as well as Manipur have boosted the sentiment further. BJP’s full sweep in the national capital’s three municipal corporations has provided further momentum and support to the market.
If the present mood is any indication, remaining two years of Modi as prime minister may not be different either. Given the spread of feel good factor after every state and local body election, markets may devour on this very oxygen.
A string of elections in states like Gujarat, Himachal Pradesh and Karnataka followed by Madhya Pradesh, Rajasthan and Chattisgarh next year would only perk up the sentiment further if the BJP continues its winning streak. Given the tattered opposition that looks hopeless as of now, Modi’s re-election as prime minister is seen by markets as a foregone conclusion. Several of the foreign consultancies and think tanks abroad have given indications to this effect giving enough reason for companies and investment firms to set aside huge chunks of funds for Indian markets.
The biggest trigger for the sustained bull run over the last three years can be attributed to two key factors: An end to large-scale corruption experienced by companies and investors during erstwhile UPA regime and decisive measures taken by Modi government to tackle black money and parallel cash economy. Above all, more transparent governance and putting an end to bureaucratic red tape seems to have appealed to all investors.
Only an attractive market with political stability and good governance will attract portfolio investments and not otherwise. Administrative reforms have now to be given added ballast with structural reform.