Markets roar to record high as investors celebrate Modi’s electoral victory, more gains lie ahead

Investors rejoiced and traders danced as the Bharatiya Janata Party’s electoral juggernaut romped home in three Hindi heartland states with winning margins that delighted equity strategists. As a consequence, the benchmark Nifty 50 soared to a new peak and there’s more in the offing.

The BJP’s stunning electoral show in the strategically important Madhya Pradesh, where it retained the state with a higher majority, and it’s decimation of the ruling rival – the Congress – in Rajasthan and Chhattisgarh, where it snatched away power, point to an easier-than-anticipated battle for the big one – 2024 Lok Sabha elections.

"Aaj ki iss hat-trick ney 2024 ki hat-trick ki guarantee dey di hai (Today’s hat-trick has guaranteed the hat-trick in 2024),” a triumphant Prime Minister Narendra Modi told thousands of adoring supporters at the victory celebrations in New Delhi on Sunday evening.

He, of course, referred to the forthcoming general elections in mid-2024 as the BJP looks to cement its third successive term at the Centre in the face of a floundering opposition.

Major stock market players are equally enthusiastic.

A Balasubramanian, Managing Director & CEO at ABSL Mutual Fund spoke at length to Business Today TV on the improving dynamics of the stock market and the economy. Bala, as he is fondly known as in the market, manages Rs 3 lakh crore in equity plus debt and his views matter.

"I think we are probably in a 10-year bull run as a country, as far as political stability is concerned, which will take economic growth to the next level,” he added. "That’s why I see a number of 22,000 (on the Nifty) which could potentially come even before the general elections.”

Meanwhile, the Nifty closed 420 points, or 2.1%, higher at 20,688 points at Monday’s end. This is a fresh record high for the index, which has risen 14.2 percent so far in 2023.

Not surprisingly, it was the infrastructure stocks such as Larsen & Toubro, Siemens, ABB and BEL coupled with government-owned companies such as BPCL, HPCL, GAIL and Bank of Baroda that jumped the most in Monday’s trade.

Analysts expect this trend to continue as the BJP has spent heavily in building wider highways, new airports and improving the overall transport infrastructure in the world’s fastest growing large economy.

To be fair, the BJP’s electoral victory comes at a time when Indian equities are already enjoying lots of other positives -- crude oil, the nation’s biggest import, is at 5-month lows, US' 10-year bond yield at 3-month lows and bullish investors are regularly pouring thousands of crores into equity mutual funds via SIPs.

What now?

Indian stocks are now getting into higher orbit as the structural construct of the market improves for the better.

Foreign investors, hitherto missing from Dalal Street, are expected to turn big buyers as they divert profit made from Wall Street’s phenomenal 12 per cent rise in less than 2 months to emerging markets. And India’s allure of a high 7 per cent GDP growth, strong earnings expansion and rising aspirational spend are definite winners.

So, what should you do in case you’ve missed this dream run on Dalal Street?

Well, the best day to start this journey is today! And do so via a simple equity diversified fund or, better still, a flexi-cap fund. Bear in mind that both schemes should have more than a 10-year history of outperforming the Nifty.

This potential rally on Indian equities will give more opportunities to new investors to enter as old ones book profit. However, the best way to play this longer term uptick is to buy and hold quality stocks and funds. Of course, there will be dips ahead, but those are to be purchased for the long term.

Market veteran Nilesh Shah, Managing Director at Kotak Mahindra Asset Management Company, mentions that the foundation of the current bull market were laid in the precarious days of Covid-19, when both the economy and the market tanked to multi-year lows. It was at this time that the BJP government eschewed fiscal profligacy and ensured long term economic growth.

"India differentiated itself with the rest of the world by following the path of fiscal prudence during the Covid crisis. That apt management was one of the reasons for accelerated economic growth in post-Covid era,” Shah said. "The base for this fiscal prudence and infrastructure build up was because of government’s actions. The markets will now get a lot of confidence from the state election results, which overwhelmingly confirm continuity of government.”