As political uncertainty subsides following the decisive win for BJP-led National Democratic Alliance, nation’s capital markets are expected to show signs of low volatility and any corrections would be lapped up henceforth, say market experts.
It was a landmark day in capital market history with both benchmark indices crossing new milestones — Nifty jumped over 12,000 and the Sensex crossed 40,000 levels. The rally in the market reflected investor expectation that the strong structural and policy groundwork set by Narendra Modi-led government in the first term will now gather momentum and arrest the ongoing domestic slowdown, which is hounded by weak private investments, job shrinkage, the stress in finance companies and contraction in industry output.
“The mandate offers a clear vote for policy continuity. Markets will respond with lower volatility and higher volumes, especially in the indexes. The RBI governor can now pursue the growth agenda unfettered. He has been remarkably prescient with both his Dollar Swap and in calling for exotic derivatives. The stage is now perfectly set for both. The stage is equally set for developing the Fixed Income and Debt Derivatives market and drive growth up by at least 3 percentage points up for the medium to long term.” said Balu Nair, Interim CEO, Metropolitan Stock Exchange.
Commenting on the markets, IndiaNivesh Securities, Head of Retail Research Dharmesh Kant said, “As expected, markets have cheered Narendra Modi’s comeback, a sign that foreign and domestic investors alike view him as a strong leader. We expect the markets to continue to be bullish going forward this year. From here on, any meaningful correction on the backdrop of global volatility will be lapped up by markets. Our advice is to buy corrections and stay invested.”
Noting that positive market movement is in line with investor expectation that a stable regime will return to power, Upstox CEO and co-founder Ravi Kumar said,”The unanimous verdict in favor NDA- led government will help boost investor sentiment as a stable regime enforces better implementation of policies.”
Agreeing with the view, Association of National Exchanges of Members of India President Vijay Bhushan observed that Modi’s effective leadership is expected to take the domestic economy to new heights and would be instrumental in building investor trust.
The experts said that while the revival of the Indian economy would be the most immediate concern for the NDA government, it will also have to deal with rising global uncertainties like Iran, China trade negotiations and Brexit.
“On the international front, Mr. Modi’s immediate task would be to deal with the rising tension in the Persian Gulf. As a waiver for sanctions from buying Iranian oil ends, India has to find other sources while making sure neither the US nor Iran gets irked by Indian actions. Meanwhile, the US-China trade war can provide the government with a rare opportunity to promote India as an investment destination on the face of rising obstacles of tariff increases by the US on China,” Kant said.
According to Kumar, “Even as global markets remain volatile due to rising geopolitical tensions, India is expected to be a favorable investment destination. Markets are likely to go for a bull run given that the business-friendly policies and structural reforms initiated by the NDA government in the last few years are bound to gather pace”.
Aided by sound macro fundamentals in form of low inflation, better tax compliance, fiscal prudence, high FDI, markets believe the stage is set for rapid economic development and will keenly watch the announcement of the cabinet and key initiatives to kick start growth, in the coming few days.
