India’s stock market has hit record highs on consecutive days over the past few weeks, largely due to an outpouring of optimism that Narendra Modi, a pro-business and no-nonsense candidate for Prime Minister, will win the upcoming election.James Crabtree reports for the FT:
The benchmark Sensex index retreated slightly on Tuesday, but the day before it nosed above 22,000 for the first time in its history, having set record closing highs on consecutive days last week.Markets have risen 3 per cent since last Wednesday, the day on which election details were revealed, and more than 7 per cent since last month, making India’s bourse the second-strongest performer in Asia, after the Philippines.“The economic fundamentals haven’t changed, but sentiment certainly has . . . There is a strong sense that the worst is now behind India,” says Eswar Prasad, an economist at Cornell university.
One company is doing particularly well, “and it isn’t hard to surmise why,” as Crabtree notes in another article. Billionaire industrialist Gautam Adani has long had a beneficial relationship with Modi. His business empire is based in Gujarat, where he has interests in ports, infrastructure, electricity, and elsewhere. Over the past few weeks Adani Enterprises has roared up 45 percent. Investors are betting that when Adani’s friend Modi takes power in Delhi, boom times will follow. The prospects for one of Adani’s biggest enterprises, a port at Mundra on the Gujarat coast (described by one analyst as “probably India’s single best infrastructure asset”) are particularly enticing: under the Congress government, Adani has struggled to get through restrictive red tape, but if (or when) Modi takes power, getting big projects like this port off and running is expected to get easier.The uptick in India’s economy is welcome news for Indians and foreign investors alike. “The prospect of a change in government has buoyed sentiment, and the hope is that the paralysis that has long afflicted much of Indian policy making might soon be over,” the Cornell economist told Crabtree.Another thing is helping boost investors’ hopes for the Indian economy: anxiety about China. There, wages are rising and growth is slowing. Some companies look to ASEAN to pick up the slack, but India is increasingly an attractive option. Japanese companies, for example, have showed renewed interest in the subcontinent. With Modi in power, that interest is likely to continue.But lurking behind this Modi optimism is a nagging worry that he might not win outright. If he can manage only a weakened coalition, the hope that Delhi will oversee a swathe of business-friendly reforms is more uncertain.