Analysts are fretting over uncertainty about the chances of Prime Minister Narendra Modi getting a second term as India heads towards a general election in five months. The concerns may be overblown.
That’s because Indian markets have surged in the last two decades irrespective of the government in power. If at all, Modi’s term hasn’t matched what investors gained during the tenure of Manmohan Singh.
To be sure, the index only rose a little over 5 percent during Vajpayee’s only full term from October 1999 to May 2004.
Economic challenges faced by each of the last four governments were different. While Vajpayee had to battle sanctions from the US after the nuclear tests, Singh’s second term coincided with the global financial crisis, record oil prices and also the taper tantrum that saw the rupee slide.
And emerging economies saw an outflow of capital as rates rose in the US even as the threat of a trade war loomed. But Modi also received an oil bonanza as crude prices remained low for much of his term.
Here’s how inflation, rupee and crude fared since 1999.
Still, a little over five months are still to go in his term and stocks usually rise in the run-up to an election. Can Nifty 50 scale 13,000?
There’s a higher probability of the index going below 10,000 as opposed to hitting 13,000 on the Nifty, according to Saurabh Mukherjea of Marcellus Investment Managers.
He expects global factors to play a bigger role than local in the index’s drift towards 9,500. “The global geopolitical setup is more tensed than I’ve seen in the last 20 years. We’re back to the Cold War-sort of spy thrillers era,” Mukherjea said. “If our elections are the local thriller, I think it’s the global spy thriller which will have a fundamental effect on our economy.”
Neelkanth Mishra, India strategist at Credit Suisse, isn’t that pessimistic but still cautious.
(This article first appeared on BloombergQuint)
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