The Indian stock market has risen a lot in the recent years; this rise is often referred to as the ‘Modi premium.’ This is the popular belief that the stock markets have gone up due to Modi’s leadership of the nation and his policies for growth of the economy. While India navigates the new edition post-election scenario, the specialists and strategic planners are reconsidering the sustainability and direction of this premium.

What is the Modi Premium?

Prime Minister Narendra Modi has implemented several economic reforms since 2014 aimed at transforming India’s economic architecture. The investor attitude has proven lucrative and has been molded by programs such as the Goods and Services Tax (GST), the Insolvency and Bankruptcy Code (IBC), and more importantly the digital drive.

The “Modi premium” is the representation of the enhanced investor confidence that has been occasioned by the changes in the market and these value a share highly. By so doing, the stability and the economic prospects realized by Modi’s policies has triggered most investors, foreign and domestic to consider Indian stocks. This premium also sums up the belief in Modi led administration’s capacity in managing the economic challenges.

The Impact of Recent Elections

Modi advantage premium is under question especially considering recent elections. While the BJP gained a large majority in the results, these outcomes also pointed to many policy shifts that were both new and uncertain. Some of the factors whose impact threatens to undermine India’s economic Course are among others rising inflation, unemployment, and diminishing global economy.

The situation outlined above has caused investors to be wary and asking whether the Modi premium is sustainable? The administration has to solve some matters that may negatively affect the market situation. Depending on how effectively Narendra Modi led administration will implement these policies and maintain economic stability, the future of Indian equities will be defined.

Coalition Governments and Stock Market Growth in India

India’s equities market has been on the rise ever since Modi took charge of the country. Increased interest from investors and letting loose of the domestic economy is perhaps evident by the fact that the market capitalization of Indian equities have nearly tripled reaching about 250%. The key problem that has arisen is the lack of policymaking, meaning that the country may remain without published policies under a coalition government. In order to maintain the supporters, more so from the alliance partners, Modi may have to go out of his way to extend certain privileges such as appointing those that supported him to his cabinet.

In the past, a coalition government has especially provided for successful further exponential economic growth within the stock market. This is evident on the basis of analyzing the period between the years 2004 and 2014 that is the period of Congress led alliance the ruling over India. Similarly, over the Course of this decade, the MSCI India index rose by more than 180 % the good, which was nearly a third more than the MSCI world index.

Source- MSCI

Future Outlook

Still, although the growth narrative is good, several problems persist: Cost pressures that include inflation levels are possible threats together with unemployment and a dwindling worldwide economy. But, the economic problem solving indicator and its ability to implement better policies lays some satisfactory guarantee with the Modi administration.

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