Modi 2.0 | Year of unusual volatility as Sensex fell over 500 pts on 28 days, rose over 500 pts on 24 days

Narendra Modi-led NDA government completed the quite eventful first year of its second term on May 30.

In terms of the market, the first year of the Modi 2.0 government has been marked with unusual volatility owing to factors like Budget and COVID-19.

While the government announced measures that are seen as long-term positive, there were moments of disappointment when the stimulus and steps failed to meet the expectations of the market.

“The first year of Modi Govt 2.0 has been quite eventful. The government tried its best to stimulate the domestic economy amidst the slowing global economic environment. The government took the historic decision to reduce the corporate tax rate which can help increase India’s economic growth in the long run,” Ajay Menon, CEO, Broking and Distribution, Motilal Oswal Financial Services Ltd told Moneycontrol.

In terms of market fall, in the first year of Modi 2.0, there were 28 such days when the Sensex fell more than 500 points in a single day on a closing basis, while there were 11 days when the market plunged over 1,000 points, data from Ace Equity showed.

On four days, the market fell over 2,000 points and on March 23, 2020, the Sensex fell 3,935 points which is the highest single-day fall in the first year of Modi 2.0.

If we talk about the market rise, there were 24 days when the market benchmark rose over 500 points, while on 9 days, Sensex surged over 1,000 points. On April 7, 2020, the Sensex surged 2,476 points which is the highest single-day gain during the first year of Modi 2.0, data from Ace Equity showed.

Key events that shook the market

Data shows there were many such days during the first year of Modi 2.0 when the market witnessed a steep rise or fall.

A sharp fall of 793 points in Sensex was witnessed on July 8, 2019, after the government proposed in Budget 2019 an income tax surcharge for HNIs (high net worth individuals) earnings more than Rs 2 crore.

The Budget was presented on a Friday and when the market opened on Monday, July 8, a strong wave of selling engulfed the market.

The sell-off was extended to many days and many investors began to fear that the market might come into a bearish phase.

The government took cognizance of the market condition and on Friday, September 20, 2019, the government reduced the corporate tax rate to 25 percent. The market cheered the decision and Sensex vaulted for 1,921 points. The gains were extended to the next trading session on September 23 and Sensex logged a gain of 1,075 points,

On February 1, 2020, the government presented its second Budget of Modi 2.0, which failed to meet the expectations of the market and Sensex took a plunge of 988 points.

Most gains and fall of over 1,000 points in Sensex during the first year of Modi 2.0 occurred in March-April 2020 due to COVID-19, lockdown and stimulus announcements.

Such has been the magnitude of market volatility of late, that a 500 points rise or fall have started to appear normal these days.

India is struggling to fight against COVID-19. The government has myriad challenges on the fronts of public health and the economy. While the government has announced a series of measures that are seen as long term reforms, the market seems to be expecting more.

The market loves stability. When the COVID-19 comes under control and all the stimulus begins to show its impact, the market will see many days of strong gains.

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