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Strong Mandate .. What Market should be looking at now?

Indian indices end higher as Narendra Modi to form a strong National Government

Indian stocks market indices surged on Friday to new high on account of the landmark victory. TModi to form a strong National Government he new strong national Government will be headed by Mr. Narendra Modi as its prime Minister. This is the first time after 1984; Indian democracy saw a majority Government.  BJP led NDA is expected to get 334 sit out of 542.

  • India benchmark Indices, Nifty, closed a new high today but shed much of its intraday gains. Nifty closed at 7203, up around 80 points after marking a new intraday high of 7563. Banks, capital good, reality & oil are the top performer where defensive sector like pharma, Information technology and FMCG was looser. Investor is now moving towards cyclical stocks from defensive stocks.
  • The Indian currency, Rupee (USDINR) has also caught up in a positive mood & closed at 59 59 rupees to the dollar

Who is Narendra Modi? (For our International reader)

Narendra Damodardas Modi was born 17 September 1950 in a small village in the state of Gujarat, India.  Presently, he is a member of the Lok Sabha, having been won from the constituencies of Varanasi and Vadodara.Presently, he is the Chief Minister of Gujarat. It is expected to resign soon to take up to the office of Prime Minister on 21st May 2014


Why this victory significant?

It was a truly historic day for Indian democracy. With a decisive mandate, it will surely positively affect India in general and Indian Economy in particular. After the end last 4-5 years of stagnation of the economy, new government can resolve many long-standing issue issues. Modi has mandate for radical economic reform.  This is just unprecedented, and it truly can bring the lot of changes the way country has been run.

How things will be move on from now?

  • Prepare a clear economic roadmap.
  • Market will look more on Economic affairs related issue rather that political.
  • Focus will now shift to budget.
  • Roadmap on various reform measures such as GST, DTC etc.
  • Clear mandate will push various long pending reforms such as foreign direct Investment (FDI), taxation etc.
  • Economic growth & spending in the infrastructure space.
  • This strong mandate will surely restore investor confidence, attract investments.
  •  Market is expecting proactive policy decision making to jump start the economy.
  • More importantly, market will be looking at Interest rate & investment cycle to Pickup.



On the valuation front, presently, Sensex is trading at around 15.6 times of FY2015 earnings. But one can expect re-rating of entire Indian market due to the strong mandate. Banking, Auto, Infrasturre should do well. . Apart from this a mid-cap stocks will provide more significant outperformance or so call alpha to the investor

India will; surely emerged as one of the best emerging market to invest. Presently, other emerging market such as China, Russia & Brazil are facing its own problem. Much of the foreign portfolio investment should come to India. We expect both portfolio and foreign direct investment to pick up significantly over next 2 years once Government starts moving on reforms.

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