Market rallying on hopes of Narendra Modi’s win in general election:CLSA

Ahmedabad, 9 November 2013

Goldman Sachs is not the first global brokerage to say that Indian markets are rising on hopes that Narendra Modi, if victorious in the upcoming elections, can revive the economy. Brokerage house CLSA’s Chris Wood – the author of ‘Greed and Fear’, who has been saying much the same for a while now, has reiterated his stance.

In a fresh note, he says markets are scaling new highs hoping that Narendra Modi will lead the National Democratic Alliance (NDA) back to power in Delhi. But the markets are in a fragile ground as the country has six months before a new government will be formed.

“Greed & Fear repeats the point that the stock market will have a dramatic rally if the BJP candidate can achieve a viable majority, a prospect that was thought inconceivable a year ago. This is because business confidence will rise dramatically, and with it the chances of a new investment cycle,” he wrote in a report on Friday.

“Perhaps more interesting than the polls, which are notoriously unreliable in India, Modi is reportedly to be drawing 6-8x the crowds that Congress’ Rahul Gandhi has been attracting in the past few days. Indeed so eager are crowds to see the charismatic Modi Greed & fear has read recent news reports that they have even been paying to see him speak. Whereas normally in developing countries mobs are paid to attend such rallies,” he wrote.

“The reality is that his electoral prospects rise the greater the sense of economic crisis and the weaker the rupee. In this sense the stock market bounce and recent rupee stability are not in his political interest,” he wrote.

Wood believes that whether Modi can actually deliver on these massive expectations building around him is yet to be seen, but his track record in Gujarat is clearly enough to justify the current leap of faith on the part of many.

Wood in his latest note also mentions that while opinion polls are already predicting NDA coalition led by the BJP to now win between 187 to 195 seats, what’s more amazing is the mass support which Modi seems to be garnering.

Wood also mentioned that even though the momentum is quite strong now, the only problem for Modi is that economic despondency seems to be decreasing.

Following this note, many other investment banks like UBS, Bank of America Merrill Lynch, Credit Suisse and most recently Goldman Sachs have been highlighting the growing popularity of Modi and his influence on Indian markets’ rise.