Markets expect Narendra Modi-led NDA govt to encourage investment, stable economic policies

New Delhi: With poll uncertainty behind, investors will now be keen to know the future course of action to boost the economy, the solution to ease liquidity situation and measures to address financial sector dislocation, analysts said on Thursday.

The focus will now be on steps taken by the government to encourage investment and stable economic policies after the BJP's strong showing in the Lok Sabha elections. Riding on a massive Modi-wave sweeping through most parts of India, the BJP is set to return to power on Thursday.

"The economic and strategic reforms undertaken in the last five years will get a fresh boost with the government led by Narendra Modi coming back to power. Continuation of a stable regime under his leadership is expected to further strengthen the domestic economy" said Dharmesh Kant, Head of Retail Research at IndiaNivesh Securities Ltd. We expect the markets to continue to be bullish going forward this year, Kant added.

"A massive mandate to the incumbent party as BJP created another historical benchmark. This is much much more than anticipated and what was expected. For markets, this means smooth functioning of existing policies, framework, economic activities and so much. This is a big thumbs up which means that all the work that has been in place for last few years would continue to function. Be it economic, fiscal or structural," Mustafa Nadeem, CEO, Epic Research said.

BSE Member Ramesh Damani said he expects more foreign fund inflows into India going ahead as there will be policy continuity and India still has a very large good scale of domestically investible universal companies and the deal flows are more likely to happen now. Now with uncertainty behind, the market will focus on steps taken by the Govt to encourage investment and give a push to consumption, which is hitting a soft patch. The market is looking at the second term of Modi sarkar to build on the foundation laid in the last term.

 Markets expect Narendra Modi-led NDA govt to encourage investment, stable economic policies

File photo of Prime Minister Narendra Modi

"Market believes that stage is set for accelerating growth to a higher level by tackling certain challenges like the revival of investment and support consumption growth. Changing the orbit of Indian GDP growth from current 7 per cent level to higher level (eventually to aspirational double-digit growth) is what markets are expecting from the second term of the Govt," said Nilesh Shah, MD & CEO, Kotak Mutual Fund.

Prime Minister Narendra Modi led his Bharatiya Janata Party towards what is certain to be a resounding victory for a second term in office.

As per Deepti Mathew, Economist at Geojit Financial Services, "Unlike in 2014, NDA-II has to deal with a much weaker economy. Rural distress and slowing investment in the country are two major issues that need to be addressed in an urgent manner. Developments in the global economy are also not favourable, especially with regard to the rising crude oil prices".

"Participants would now be keen to know the future course of action for bringing the economy back on track, a solution to the liquidity situation, the Union budget, onset and progress of monsoon in June and most importantly the earnings trajectory," Devang Mehta, Head - Equity Advisory, Centrum Wealth Management said.

An analysis of the stock market movements from 16 May 2014 till date showed that the 30-share BSE Sensex jumped 14,689.65 points or 60.89 per cent. The index hit an all-time high of 40,124.96 points in morning trade on Thursday, amid trends pointing towards a thumping majority for Modi-led NDA in the general elections.

"Unlike the first five years, the solution to the problems is complex and requires a radical shift in the economic policy. If the first five years of the government were dominated by housing, roads and toilets, the next five would have to be dominated by investment, jobs and nursing of the dislocated financial sector. Among immediate priorities we expect the Modi-led government to take measures to revive consumption, address financial sector dislocation by recapitalising PSU banks, boost manufacturing sector to ensure job creation and solve the conundrum of skill shortage in the country to ensure employability," said Garima Kapoor, Economist, Elara Capital.

The overall market capitalisation (m-cap) of BSE-listed companies has grown from little over Rs 75 lakh crore to Rs 150.25 lakh crore during 16 May 2014 and 24 May 2019 period.

"It is expected that reforms in labour and education system would be accelerated. It is expected more job creation mainly in the manufacturing, services sector like tourism, hospitality, financial services would be accelerated," said Essel Mutual Fund CIO Mr Saravana Kumar.

The unanimous verdict in favour NDA-led government will help boost investor sentiment as a stable regime enforces better implementation of policies. Even as global markets remain volatile due to rising geopolitical tensions, India is expected to be a favourable investment destination", according to Balu Nair-Interim CEO, Metropolitan Stock Exchange. Markets are likely to go for a bull run given that the business-friendly policies and structural reforms initiated by NDA government in the last few years are bound to gather pace, he added.

"The stock market likes certainty. The strength of this mandate for the BJP assures stability in government, stability in governance and continuation of the development agenda for the next five years.  In all likelihood, the market will remain euphoric in the coming days. Post that, the focus will shift back to corporate earnings, liquidity situation and global events," said Amar Ambani, President and Head of Research, Yes Securities.

According to a MorningStar report: "A stable government at the Centre is expected to encourage FPI inflows into Indian markets". On macroeconomic outlook, it said that adherence to fiscal discipline and resolution of stressed assets will broadly drive the growth prospect in the second term of NDA.

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Updated Date: May 24, 2019 07:28:29 IST