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Expectation

Market celebrates Modi’s 3 years in style, but he isn’t the only PM to woo Dalal Street

NEW DELHI: The domestic equity market breached the 31,000 level and Nifty50 topped 9,600 for the first ever on Friday, which coincided with Prime Minister Narendra Modi completing three years in office.

Modi is seen as a strong leader who has embarked on a number of reforms that made India topple China as the top FDI destination. With his strong campaigns, including ‘Make in India’ and mega reforms such as goods & services tax (GST), India is making noises, for all the good reasons.

The optimism over the economy is such that the country is seen as a bright spot in the global economy.

Crude prices are substantially down compared with three years ago, inflation is relatively stable, industrial output is looking up and rating agencies see over 7 per cent plus growth for the country in years ahead.

Yet, stock market investors made lesser money in Modi’s first three years in office than his predecessors, at least since 1991.

Under Modi’s three years in office, Sensex has returned just over 24 per cent. Midcap and Smallcap indices surged 66-68 per cent during the period.

While the returns were higher when compared with Manmohan Singh’s second term in office — whose government was marred with corruption charges — they were no match for a massive 191 per cent return seen in Singh’s first three years in UPA I stint, and 218 per cent spike seen in comparable period for Narsihma Rao’s reign. Rao is regarded as the father of Indian economic reforms.

On the other hand, former Atal Bihari Vajpayee’s first three years saw Sensex falling 40 per cent (October 1999-October 2002) during the period.

Singh’s first three years in office (May 2004- May 2007) were marked by optimism over the pink health of the global economy, which were only to blow out in the months to come when US financial crisis put global growth into jeopardy.

Vajpayee first reign spanned for just 13 days in 1996, while his second term spanned from March 1998 till October 12, 1999. This was the same period when Kargil war took place. Vajpayee was reappointed as PM subsequently.

In total Vajpayee reign spanned six years and 64 days.

Meanwhile, Inder Kumar Gujaral and HD Deve Gowda were two PM’s whose reigns did not last three years.

While the domestic triggers do play a role in forming a view on the market, global cues were not that good for the Modi government in the past three years.

Global growth remained anemic, with fears of currency war, protectionism, US Federal Reserve’s rate hikes, geopolitical tensions, remaining high.

A delay in earnings pickup is another soar point for investors. India government bonds have been hugely popular with foreign investors.

That said, ETMarkets.com’s latest survey of 10 leading domestic brokerages gave thumbs up to the Modi government. This government’s is rated 8 on a scale of one to 10.

The survey participants made bullish projections for the remaining two years of the Modi government’s current term, with some saying the Nifty50 should get past the 14,000 mark by the time the next general election is called.

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