India’s stocks rally as Narendra Modi’s BJP nears election win, but can bull run continue?
- Government policies such as building infrastructure and expanding digital payments to remote communities have fuelled positive sentiment
- However, analysts say younger investors may be ill-prepared to cope with any shock poll results as they have not seen drawdowns on a sustained basis
India’s stock market is poised to gain further in value since overtaking Hong Kong’s last year, on the back of positive investor sentiment that Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) would win a third mandate in the coming national elections.
Analysts have warned that punters could be vulnerable to a sharp correction if the BJP has to make way for a coalition government, which could lead to political instability.
Both the benchmark Bombay Stock Exchange Sensitive Index, also known as the Sensex, and the National Stock Exchange’s Nifty index, scaled new all-time highs at the start of the new year to 72,562 points and 21,834 points on January 2.
After a brief bout of profit-booking earlier this week to cash in on the rally, the index resumed its upward march on Thursday. Both the Sensex and Nifty were marginally up on Thursday morning at 71,668.68 points and 21,602.35 points, respectively.
“Once the state elections results were out, the base case for continuity of the government has strengthened,” said Mihir Vora, chief investment officer at Trust Mutual Fund, underscoring that the government’s record of policies like production-linked incentives for manufacturing and infrastructure development had fuelled the positive sentiment.
The government’s reputation for governance had also been embellished by programmes such as expanding digital payments to remote communities, he said. But he warned that many younger investors would be ill-prepared to cope with any shock poll results.