Sensex

Narendra Modi’s epic win in the Lok Sabha elections 2014 is now set to change the face of Indian politics. Even as NaMo gets ready to lead a 15-member delegation today and meet the President, staking claim to the coveted PM chair (he is expected to be sworn in by May 26), Indian stock markets extend their rally in anticipation of a robust financial future.

Bull Run?

India’s benchmark stock market index, the S&P BSE Sensex, traded at near record levels and closed at 24,363.05 points on Monday and at 24,377 points on Tuesday. On the election results day, Sensex soared to a new intra-day high of 25375.63 points. Market watchers predict that the Indian stocks could as much as double within the next 5 years.

While the long term predictions are strong, a near-future dip or correction cannot be ruled out, experts believe. While it is clear that no overnight miracles can be expected from the new government and that poignant economic reforms are likely to take years to impact the economy, it looks like India is at that stage of development where the confidence of domestic investors is high, and the leaders are determined to take the country to a new level altogether. The stock markets are likely to remain healthy, and the weak earnings on US bonds keep emerging-market bonds such as India’s, attractive for investors.

Strengthening Rupee

Following the volatility seen in the previous fiscal, the Rupee strengthened to new heights following NaMo’s candidature as NDA’s prime ministerial candidate. Economists and market watchers predict a much stronger domestic currency this FY. On May 13, the Rupee hit a 10-month high and all Indian hopes are pinned on business-friendly policies of the new Finance Minister and the RBI. India’s domestic currency traded at 58.6 to the dollar on Tuesday, and chances are it may hit the 58.5 mark this month.

The stocks of pharma and IT companies have been hit the most, due to apprehensions that a strong Rupee may affect their earnings. On Monday, the TCS traded as low as 2034. While a strongly appreciating domestic currency is certain to adversely affect exports, India is sure to gain from the ease of imports – oil, gold, and electronics, are likely to be major gainers in such a scenario.

Sectors To Watch Out For

Over the past 10 days, capital goods stocks soared to new heights. Scrips of Siemens, BHEL, and L&T reached their 52-week high figure. Shares of companies associated with the Indian Railways also soared in this duration. Predictions are that the undervalued shares of small and midcap companies are expected to do well in this fiscal.

It comes as a corollary to the government’s focus on infrastructure and development that the financial institutions that will make finance available to such development will remain in firm focus. Banks, lending institutions, and bond and equity markets and will be promoted by the NaMo government, experts say.

The Indian Railways seems to be at the center of focus even before NaMo announces his choice for a Railway Minister. All companies that are associated with our rail network system are likely to gain and do well in this FY and the next.

Strengthening Environment

Looking at the strength of the mandate received by the NDA, and anticipating the areas that the new government is likely to strengthen, it is highly likely that roads, infrastructure, utilities, sanitation, rail and road communications, healthcare, education and manufacturing are likely to receive a healthy inflow of government funds. India’s potential to grow is equally high. With about two-third of its population still living in rural areas, India is a market with a high demand for infrastructure and urban development. And NaMo’s promise “No red tape, only red carpet for investors” resounds loudly in the markets.

Indians and market watchers are now keenly looking out for a scenario similar to Japan’s spurt of development. With Shinzo Abe taking over as Japan’s PM, Japanese markets grew at about 80% within a matter of 6 months. Will India develop into one of the strongest economies in Asia? Will the Bull Run last long enough? Time to wait and watch.

Related Information:

Expectations from BJP’s Budget 2014-15