Mandate for Modi: Investors await gains

(MENAFN- Arab News) As india turned right with the incredible decisive victory in its parliamentary election for the opposition bharatiya janata party (bjp) and its prime ministerial candidate narendra modi on friday the sensex (stock index) greeted the news by rallying nearly 1400 points in intra-day trade to cross a historic high of 25000.

the sensex in mumbai surged in early trading jumping as much as 6.1 percent to touch an all-time high of 25375.63 before paring gains. it is being keenly watched whether the stock index will maintain the momentum when the stock exchanges open on monday three days after the electoral tsunami hit the country.

the sensex has climbed about 14 percent this year and trades at 15 times the projected 12-month earnings the most expensive level since 2011.

india's currency also strengthened.

in fact the value of indian equities has climbed by more than $330 billion since sept. 13 when the bjp named modi as its prime ministerial candidate.

a glaring development is that global funds bought a net rs.36.3 billion of indian stocks on friday the highest single-day inflow since march 21 according to data from the exchanges.

the stock market has risen five percent in the past week alone as optimism returned despite low investment weak growth stubbornly high consumer inflation and widespread corruption.

both the congress which ruled the country for the past 10 years and even earlier since independence and the bjp which has now received a massive mandate concede that the economic problems are quite acute and there is no magic wand.

the immediate change the new government will need to deliver is an improvement in the economy and to go for reforms which will help improve the business climate where growth has faded.

the economy is growing at its slowest rate in a decade and this is what the new government needs to attend to on priority.

economists expect india's growth to pick up only marginally to 5.3 percent in the current financial year from an estimated 4.9 percent last year — half the rate notched up during india's boom times.

the rupee surged 1.14 percent to 58.62 against the dollar building on gains in recent weeks that have been fueled by expectations that a victorious modi will introduce reforms to turn around the economy.

will the new bjp government fulfill its promises on the economic front? wait and watch.