In a symbolic display of unbridled exhilaration over what promises to be a brighter Modi 2.0 era, India's benchmark BSE Sensex crossed the 40,000 mark for the first time in its history on Thursday in less than two hours of market opening before paring all gains before close.
The National Stock Exchange's Nifty index also crossed the psychologically important 12,000-mark in what analysts said was an expression of solidarity with the electorate that had overwhelmingly voted for a continuation of the Modi regime for another five-year term.
Undeterred by the short-lived excitement, analysts however said they are quite upbeat on the long-term prospects with a Nifty target of 13000 attainable. Most pundits expressed optimism that in the coming days, markets would continue to outperform, albeit to sustain the momentum the government has to tackle a host of headwinds.
Underpinning the overriding euphoria on Thursday, the rupee rallied against the dollar as poll results indicated a landslide win for the BJP-led NDA alliance, prompting currency experts to predict that the currency could even appreciate to 67 per dollar in a bullish scenario with a stalwart statesman firmly on the saddle. However, the rupee erased all its morning gains and traded lower by 19 paise at 69.85 per dollar versus previous close 69.66.
According to an equity strategist at Morgan Stanley, the overall market sentiment is positive as there will be no change in administration, making it easier for the market to predict government policies.
Abhishek Sharma, founder and CEO, Foundation Holdings, said with Modi at the helm of Asia's third largest economy for another five years, the goal to make India a $10 trillion economy by 2030 just got a turbo-charge. "India's continued growth can be attributed to key factors: the pragmatic leadership of Prime Minister Modi and his team; an effective public bureaucracy; effective control of corruption and reliance on the 'best and brightest' citizens through investment in education and healthcare."
Economists sounded upbeat on the outlook of the $2.8 trillion economy during the second term of the Modi-led government, with GDP growth forecast to average annually around seven per cent over the 2019-2023 period.
HIS Markit said in a note that while the continuity of macroeconomic policy over the next five years is assured, the key economic challenge would be to sustain reforms. The ruling coalition still does not have a majority in the upper house of parliament, the Rajya Sabha, and this will pose hurdles to the party's legislative reform agenda, it said.
"India is forecast to become the world's fifth-largest economy in 2019, reaching a total GDP size exceeding $3 trillion, and overtaking the UK. By 2025, Indian GDP is also forecast to surpass Japan, which will make India the second-largest economy in the Asia-Pacific region," it said.
Key economic challenges in the Modi's second term of office will be to continue to drive reforms in the public sector banks and reduce the burden of non-performing loans on their balance sheets, as well as to drive the transformation of India's industrial sector through 'Make in India' strategy, according to Rajiv Biswas, IHS Markit Asia-Pacific Chief Economist
Surendra Hiranandani, Founder & Director, House of Hiranandani, said the new government would demonstrate concrete action to push investments, increase growth and generate employment.
"We expect that the new government can do away with unnecessary documentation which will help real estate players immensely. It is important that single window clearance is soon put into practice which will not only resolve operational issues prevalent in the industry, but would improve the productivity of the real estate industry.Currently, the permissions are coming at a snail's pace."
He said private sector participation in housing is necessary to bridge the gap between demand and supply and for that it is desirable to create policy framework to minimise and simplify approvals required for development of a real estate project. Real Estate sector stands among the critical sectors in terms of investments and employment and we look forward to initiatives that would further aid to the growth of the sector in the near future.
Anuj Puri, Chairman, Anarock Property Consultants, said with Modi 2.0, the steady momentum that the real estate sector has been regaining in recent times would not only maintain its pace but pick up speed. "The much-touted 'Housing for All by 2022' initiative's viability has been questioned precisely because if it is to succeed. It needs sustained efforts from a determined government. This mission could now actually see fruition, if not by 2022, then at least towards the end of this new five-year term."
Puri said the overall sentiments among all stakeholders - buyers, builders and investors - will remain bullish with this highly pro-development government retaining charge. "The fact that the largely theoretical exit poll results boosted the Sensex to its biggest 1-day rise in 10 years strongly indicates that traders and investors support Modi and all that he stands for."
Manas Mehrotra, Chairman, 315 Work Avenue, a leading co-working space provider, expects the new government to allocate additional funds exclusively for developing infrastructure and improving connectivity in the peripheral areas of cities, especially the metros that will spur growth in the future. The government should also focus to build start-up hubs across the nation to drive entrepreneurship, said Mehrotra.
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