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Is Narendra Modi wave losing steam with investors?

business Updated: Feb 27, 2014 01:26 IST
Manik Kumar Malakar
Manik Kumar Malakar
Hindustan Times
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Are investors on Indian stock markets quietly factoring in the possibility of a fractured mandate and a hung Parliament following the Lok Sabha elections?

Most investors HT spoke to declined to come on record because of the sensitivity of the issue but pointed to data on Sensex movement and FII inflows to say that investors now seem less certain of the eventual outcome than they were two months ago.

This is in sharp contrast to the last quarter of 2013 when the markets rose sharply in anticipation of a victory for a Narendra Modi-led NDA following such projections by Goldman Sachs, Nomura and CLSA.

Consider the numbers: The Sensex zoomed 1,653.53 points or 8.5% rise in the quarter ended December 31, 2013. Since January 1, however, it has been stuck in a narrow range, falling 0.73% from 21,140.48 to 20,986.99. FII inflows mirror this trend: It has fallen from `39,908 crore in the last quarter of 2013 to a mere `1,061 crore in the year to date.

The implication: investors are playing safe and refraining from placing bets on the eventual winner.

Domestic investors, who had never been very enthusiastic about the FII projection, are now taking their projections of a certain NDA victory with a pinch of salt. “The markets will trade within a narrow range till the elections,” said Kishor Ostwal, CMD, CNI Research, adding: “It will fall in a major way if the Third Front comes to power.”

“The markets have only partially factored in a stable or majority government. A lot more remains to be discounted,” said V K Vijayakumar, investment strategist, Geojit BNP Paribas Financial Services.