Indian investors get a handsome 17-18.5% return from stocks during the financial year ending March 2017, as the Narendra Modi government aggressively pursued crucial reforms such as the Goods and Services Tax and after an emphatic win in the Uttar Pradesh election.
The 30-share benchmark Sensex ended the financial year up 16.9% while the broader Nifty was up 18.5% as the reforms push bolstered investors faith in the growth story of Asia’s third largest economy.
On Friday, the Sensex closed the financial year down 0.1% at 29,620.50, while Nifty ended flat at 9,173.75.
Investors are betting on a further rise in the share prices in the coming days as GST is rolled out, Indian companies post better profits and as the economic growth picks up.
“Investors expect Sensex to be the best performing asset class...They expect the market to end the year at 31,385 (versus our view of 33,000), 6% higher than current levels,” Morgan Stanley analysts Sheela Rathi and Ridham Desai wrote in a research note citing an investor survey.
“In terms of market strategy, 44% of investors think stock picking remains the best strategy and another 35% think this is a bull market and they are buyers of equities,” it said, adding 2/3 of investors surveyed expect India to outperform other major emerging markets.
The robust returns come amid many important developments in India, including the passage of GST Bills in Lok Sabha, demonetisation drive, the surprise exit of Raghuram Rajan from the helm of Reserve Bank of India and tax cuts announced in the Budget.
Indian stocks have especially surged in the past three months with the Sensex rising 11% from the end of December. The UP election results showing BJP’s overwhelming win in the country’s biggest state and a positive signal to Modi’s second term at the Centre compounded investor confidence.
“Indian financial markets have had a great ride in first quarter of calendar year 2017. This follows exceptionally high volatility and the related hit caused by the unexpected demonetisation announced in early November and the strong dollar rally,” CLSA said in a note.
Global developments especially in the United States and a general improvement in economic outlook also aided the bull run.
Donald Trump’s surprise win at the US presidential elections and his promise for tax cuts and $1 trillion investment in infrastructure annually coupled with Federal Reserve’s assurance of “gradual” interest rate hikes have sparked off a global stock rally.
The US benchmarks Dow Jones Industrial Average is up 17% while Nasdaq is up 21% in the last 12 months. UK’s FTSE-100 is up 19% despite the Brexit worries.
In Asia, the Japan’s Nikkei is up 13.5% on extension of Bank of Japan’s monetary stimulus and a pickup in growth but Shanghai stock index was up just 7% as the economy continues to slow.