Foreign investment will increase in the stock market after the Lok Sabha elections, foreign investors bought stocks worth 21 billion dollars in 2023.
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Goldman Sachs Report: Lok Sabha elections are likely to be held in India after April. Its effect is likely to be visible on the stock market. Strategists of Goldman Sachs Group Inc. have claimed in a report that after the end of the Lok Sabha elections in the country, investment by foreign investors in the stock market will increase. Asia Pacific equity strategist Sunil Kaul said in an interview in Singapore that there are some people who are still hesitant before the elections, once the elections are over, you can see many people coming into the market. He said high stock valuations are another reason to stay away that is often cited, but earnings growth should address this. Foreign investors bought shares worth $21 billion on a net basis in 2023, but the pace has slowed down this month ahead of the April-May elections. Where Prime Minister Narendra Modi is expected to win the third term. Many funds remain light on holding of Indian shares.
Indian stock market gained for the eighth consecutive year
Sunil Kaul said that if you look at the global pool of money. While it is larger than the pool of Asia and emerging markets, it is still underweight compared to India. Goldman’s analysis showed that global mutual funds with combined assets of about $2.4 trillion are underperforming India by about 150 basis points compared to the historical situation. Trading at record highs, India’s stock benchmarks have gained for the eighth consecutive year as investors bet on the country’s rising economic growth prospects and see it as an alternative to China’s struggling market. He said Goldman has a strong case for ‘policy continuity’ for India after the elections. The market is overweight on expectations of approximately 15% annual earnings growth this year and next year. He said that this should keep the evaluation under control. The NSE Nifty 50 index is trading at about a 50% premium to the rest of Asia Pacific.
The momentum came from BJP’s victory in three states
Bharatiya Janata Party had won the assembly elections in three states Rajasthan, Madhya Pradesh and Chhattisgarh last month. Between 1980 and 2019, the six months preceding 11 general elections saw an average return of 14.3% for the Sensex. Looking at the figures, it can be estimated that the Indian stock market can grow rapidly even amidst political uncertainty. According to analysts, the strong performance of the market has been due to hopes regarding the formation of a stable government. Apoorva Sheth, Head of Market Perspective at SAMCO Securities, says that looking at the current market scenario and past data, it seems that there could be another pre-election rally with softening in 10Yrs US bond yields. Increased political spending related to elections also contributes to the positive sentiments in the market. The last elections in the country were held in the year 2019. Six months before that election, there was a rise of about 10 percent in the Sensex.
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