{"id":26081,"date":"2024-04-14T05:40:31","date_gmt":"2024-04-14T05:40:31","guid":{"rendered":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/04\/14\/lok-sabha-polls-emerging-market-bulls-tout-modi-premium-times-of-india\/"},"modified":"2024-04-14T05:40:31","modified_gmt":"2024-04-14T05:40:31","slug":"lok-sabha-polls-emerging-market-bulls-tout-modi-premium-times-of-india","status":"publish","type":"post","link":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/04\/14\/lok-sabha-polls-emerging-market-bulls-tout-modi-premium-times-of-india\/","title":{"rendered":"Lok Sabha polls: Emerging-market bulls tout Modi premium – Times of India"},"content":{"rendered":"
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Under Prime Minister Narendra Modi, India\u2019s stocks have commanded an unprecedented premium to emerging-market peers. As he seeks a third successive term, investors are betting that the performance can continue.
Modi is likely to spend heavily on manufacturing and infrastructure should he win, continuing a strategy that wooed money managers during his decade in power.The stock market has rallied to successive records, while India\u2019s imminent inclusion in a major global bond index is expected to lure billions of dollars in inflows.
A \u201cpro-growth, pro-market agenda\u201d is being endorsed by the electorate, said Andrei Stetsenko, a New York-based portfolio manager of Farley Capital. \u201cTo a much greater degree than a decade ago, the company managements with whom I meet feel the government is on their side.\u201d
Modi\u2019s 10 years in office have ensured political stability and policy continuity, helping reduce extreme swings in asset prices and turning India into a preferred investment destination for global funds. The election will start, in phases, on April 19.
When votes are counted on June 4, it will all boil down to whether or not Modi\u2019s party wins a clear majority in the legislature. He has predicted a tally of more than 400 seats for his Bharatiya Janata Party and allies, though it remains to be seen whether the electorate\u2019s top concerns over lack of jobs and high inflation, as highlighted by a recent poll, weigh on his popularity.
In 2019, the alliance led by the BJP won more than 350 of the 543 seats in the lower house of Parliament.
\u201cModi has unlocked India\u2019s potential,\u201d said Mike Sell, head of global emerging equities at Alquity Investment Management Ltd. \u201cInvestors prefer stability and clarity. A majority government versus an unwieldy coalition would certainly be preferable.\u201d
Here is a deeper look at how Indian assets have performed under Modi:
Equity premium<\/span>
The median premium paid by global investors to own Indian shares against buying equities in other EMs jumped to 54% under Modi\u2019s tenure, from 30% during the previous regime led by the Indian National Congress, data compiled by Bloomberg show.
In contrast, stocks in China witnessed a median discount of 4% to peers during the last decade, reflecting the diverging fortunes of the world\u2019s two largest emerging markets.
In terms of absolute returns, the MSCI India Index\u2019s surge of almost 200% under Modi looks tamer in comparison to the more than 300% rally the index saw in the previous decade.
Investor confidence in Indian markets still seems to have grown under Modi, with volatility plummeting across asset classes. For stocks, the median 30-day volatility in the benchmark NSE Nifty 50 Index dropped to 13 points over the last decade, from 18.5 points in the previous comparable period, data compiled by Bloomberg show.
\u201cIndia offers a strong protection on downside in terms of volatility,\u201d said Vivek Dhawan, portfolio manager at Candrium Belgium NV. \u201cIn the last two-to-three years, there were a lot of headwinds \u2014 geopolitics, interest rates going higher and all that \u2014 but that meant India\u2019s appeal due to its low volatility increased.\u201d
Rupee\u2019s calm<\/span>
While the Indian rupee steadily depreciated during Modi\u2019s two terms, volatility in the currency has petered out in recent years, making it a favorite among carry traders.
The central bank has kept such a tight grip on the rupee that expected swings based on options prices have fallen the most in the world over the past decade. That\u2019s a big change from the prior 10-year period, when the rupee was one of the most volatile currencies.
Currency stability in turn has boosted the attractiveness of the nation\u2019s sovereign debt for foreign investors, with Indian bonds seeing the longest monthly streak of inflows in almost a decade ahead of their inclusion in major global bond indexes.
A Bloomberg gauge of India\u2019s benchmark sovereign bonds has given positive returns in all 10 years of Modi\u2019s tenure, and looks set to edge higher if he retains power.
\u201cIndia is defying the EM wisdom of at least one step back for every two steps forward,\u201d Macquarie Group Ltd.\u2019s Viktor Shvets and Kyle Liu wrote in a note dated April 8. \u201cIndia is likely to continue on its gravity-defying path, with less inflation, stable growth and lower risk premia.\u201d <\/div>\n