Modi premium for Indian stocks gets a hard look after elections
economictimes.indiatimes.compolicy reforms and rapid economic growth under Prime Minister Narendra Modi to justify its record premium over emerging-market peers.
Now, with the leader facing coalition politics after a weaker-than-expected mandate in this week’s national election, the so-called Modi premium is under scrutiny. Investors want to see evidence that Modi can sustain his reforms with the same vigor, while keeping alliance partners happy and avoiding populist measures to regain public support.
Policy continuity is now emerging as a crucial factor for global money managers weighing investments in the world’s fifth-largest stock market. Next month’s budget will be the new government’s first test, as fiscal discipline has been a hallmark of Modi’s decade in power.
“People are still in a wait-and-see mode until we see what policies are likely to come up, how are they are going to fund them and what’s the give and take the coalition has to make,” said Rahul Ghosh, an equity portfolio specialist at T. Rowe Price in Singapore. “We’re evaluating our India positioning and considering whether we should add more.”
Skepticism from foreign investors is evident. They sold more than $2 billion of local shares on a net basis on Tuesday and Wednesday, even as buying by local funds and retail investors helped the benchmark NSE Nifty 50 Index climb to a new record Friday, recouping losses spurred by the stunning election result.
Modi’s 10 years in office have ensured political stability and policy continuity, making India a preferred investment
