A year-ago, when Narendra Modi became the Prime Minister of India, investors were optimistic he could become the most business-friendly prime minister India has ever known.
These hopes pushed up stock prices but the Modi rally quickly lost momentum as the realities of running the world’s largest democracy set in.
In terms of the Sensex performance under his watch, Prime Minister Modi has actually underperformed most previous prime ministers.
During his first year in office, the benchmark index rose 13%. The Sensex did much better during Manmohan Singh’s first year–which started in 2004–when it jumped 31%. During the first year of P.V. Narasimha Rao it more than doubled.
The only recent prime minister that received a worse review in terms of stock prices was the Bharatiya Janata Party’s Atal Bihari Vajpayee. During his first year-from March, 1998– the index fell 4%.
Of course, no prime minister should be rated on how the volatile stock market does during his first year. It takes years to implement policies and there are many other factors that decide how well company earnings and stock prices perform in any given time period.
Prime Minister Rao did so well because he took over in 1991 when India’s economy was about to collapse, said U.R. Bhat, managing director at Dalton Capital Advisors, a Mumbai-based money management firm.
“The market rewarded him for successfully steering the economy out of that situation,” he said.
Prime Minister Modi also inherited an economy that was struggling. Analysts say his gradual revamping of the economy has had a less dramatic effect on the market.
“While ‘big-bang’ reforms were fewer, we sense that the government’s modus operandi in the first year was to accumulate low-hanging fruits with an increased focus on efficiency and removing hurdles for companies and enterprises to run a hassle-free profitable business,” PhillipCapital said in a note.
Rediff. Com