Even as investors are beginning to cut their euphoric expectations, the Indian equity market yielded close to 13% in the first year of Narendra Modi’s appointment as India’s Prime Minister. The rally, which was supported by a cumulative buying of close to $ 15.3 billion by foreign portfolio investors (FPIs), resulted in 31% gains recorded by the benchmark Sensex from September 2013 to May 2014 –the period between announcement of Narendra Modi’s Prime Ministerial candidature and his eventual anointment at the Centre.
Despite a general moderation in market sentiment, Gujarat-based stocks continued their strong momentum in the last one year. An index representing 67 such companies that have a market cap of more than Rs 500 crore, has gone up 45% in the last one year.
Although the infra and capital intensive sectors showed strong gains in the pre-election rally due to rising expectations of policy reform, they have lost the steam in the last one year. Not surprisingly, highly leveraged companies from infra, power and steel sectors are the biggest losers in the last one year. In contrast, consumption driven stocks continued to find favour amongst investors, with FMCG, pharma and auto ancillary companies reporting two to three-fold gains in stock prices during the year.
Reflecting the views of about a hundred foreign investors, UBS Securities recently said that investors have tapered their expectations on India’s economic growth as they turned more realistic about how the government can lead the macro recovery.
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First Published on May 26, 2015 12:13 am