How is the josh? The dialogue from the movie Uri got cult status when prime minister Narendra Modi asked the audience the same question at the inauguration of the National Museum of Indian Cinema in Mumbai early this year. And after the thumping mandate that the BJP got at the hustings, the josh (adrenalin) is running high among foreign portfolio investors (FPIs) as well.
In fact, in just five months of the current calendar year (CY19), FPIs have pumped in a whopping Rs.741 billion into Indian equities after a sell-off saw them pulling out Rs.326 billion in CY18 (See: Pumping it up). What’s interesting to note is that the current year’s flow surpasses cumulative net flows seen over the past four years. The year that the BJP stormed into power (CY14), overseas investors had invested Rs.971 billion.
Putting the rally into context, Mahesh Nandurkar, India strategist at CLSA, says, “What we saw early in the year was a catch-up rally since India was trailing the rest of Asia. In fact, despite the big jump in FII investment in March, Indian market barely caught up with peers. The outperformance only began in May as the verdict came as a huge surprise for foreign investors.”
This year’s Lok Sabha election will go down in India’s history for more reasons than one. It’s the first time that a non-Congress party has come back to power for the second term. It is also the first time since 1984 that a party has captured 300 seats on its own. It was in 1984, after Indira Gandhi’s assassination, that the Rajiv Gandhi-led Congress Party created a record with 404 Lok Sabha seats.
The resounding jump in the indices means investors believe that Modi will continue with his reform initiative. And with a new finance minister in Nirmala Sitharaman, who has handled commerce and defence portfolios in the past, there are huge expectations from North