Sensex Surpasses 74,000 at Start of Month
Hits All-Time High Then Pauses
Optimism for Rebound if Modi Secures Third Term
Blackstone Plans to Increase Stake Over Next 5 Years
Modi, Prime Minister of India Photo by Yonhap News
Analysis suggests that if Prime Minister Narendra Modi succeeds in securing a third term in next month's general election in India, the Indian stock market will have another opportunity to rebound. The world's largest private equity firm, Blackstone, has already announced plans to increase its allocation to Indian assets in its portfolio over the next five years.
On the 28th (local time), major foreign media reported that India's benchmark index, the SENSEX, briefly paused after surpassing the 74,000 mark earlier this month to reach an all-time high. However, the market outlook remains optimistic. The SENSEX, which has risen every year since 2016, recorded its highest level of 74,119.39 on the 7th. Following this, concerns about market stagnation arose due to the Securities and Exchange Board of India (SEBI) introducing regulations to curb inflows into small- and mid-cap mutual funds, leading to a slight correction.
"Prime Minister Modi's Re-election as a Momentum for Stock Market Rise"
However, the market views the general election, which will be held over six weeks starting from the 19th of next month, as a potential catalyst to lift the stock market again. Local media almost unanimously expect Modi to secure a third term. Since taking office in 2014, he has elevated the economy from the 10th to the 5th largest globally and brought over 100 million Indians into the middle class, achievements that have kept his approval rating above 70% for several years.
Major foreign media, citing expert analysis, forecast that "the Modi government's re-election, which has pursued a neutral strategy amid US-China tensions, will extend the stock market rally." Sunil Kaul, Asia-Pacific equity strategist at Goldman Sachs, emphasized, "India has demonstrated the ability for strong economic growth to translate into corporate and stock market returns."
There are also expectations that institutional investor inflows will continue. Blackstone plans to acquire an additional $25 billion in Indian private equity assets over the next five years. Amit Dixit, head of Asia private equity at Blackstone, stated, "India's robust economic growth and capital markets are driving the acceleration of large-scale portfolio creation."
Aditya Suresh, head of Indian equity research at Macquarie Capital, noted, "The number of members in Indian pension funds investing in the stock market has increased tenfold over the past five years," adding, "Following the official announcement of the current government's third term, foreign institutional investor inflows are also expected to rise."
"New Government Needs to Enhance Predictability"
However, improving the predictability of administrative procedures remains a challenge. Eric Garcetti, the US Ambassador to India, told Bloomberg in an interview, "To capitalize on India's rapid growth, US pension funds, Kolberg Kravis Roberts (KKR), and Blackstone want to invest more in Indian infrastructure and manufacturing sectors." However, he added, "There are still many cases where concerns about ease of doing business in India cause hesitation in investment," and said, "After the general election in April-May, the new government should make greater efforts to improve the business environment."
He predicted, "If India can continue economic measures such as reducing trade barriers, expanding infrastructure investment, and increasing exports, it could achieve growth rates exceeding 10%, similar to those enjoyed by major East Asian countries in the past."
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