PM Modi predicts post-election markets rally, cites PSU stocks strength

Prime Minister of India - Narendra Modi

Prime Minister Narendra Modi predicted a significant boost to the stock market following the election results, expressing confidence in the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government retaining power with a strong majority for a third term.
In an interview with the NDTV Profit television channel, Modi said he expects a stock market rally within a week of the June 4 election results because of the positive impact of the government’s policies on investor confidence.

“Those who punch trades will get tired,” he said. Modi was responding to a question on whether the markets have turned nervous regarding the election results, especially having priced in a BJP-NDA win.

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Benchmark indices BSE Sensex and NSE Nifty 50 have been volatile recently. The Nifty fell more than 4 percent to 21,821 after hitting an all-time high of 22,794.7 in early May. It has since recovered to 22,500.

Market analysts note that concerns over the election results are causing significant volatility. The India VIX, a measure of market volatility, doubled to over 20 in just three weeks from its recent swing low. Historically, the VIX has risen to as much as 29 ahead of elections, indicating heightened market sensitivity.

While Modi’s assurances aim to bolster investor confidence, experts caution that volatility may persist until the general election results are announced.

Rising value of PSU stocks

The Prime Minister also highlighted the impressive performance of stocks of state-run companies as evidence of the nation’s economic strength. “Look at where the PSU companies’ shares have reached today. PSU shares at a time were synonymous with falling prices. But now, in the stock market, their value is rising, several times. Look at HAL (Hindustan Aeronautics Ltd) — it has posted record profit in the fourth quarter of Rs 4,000 crore.”

Economic reforms and stock market growth

“Our government has carried out maximum economic reforms,” said Modi. “Pro-entrepreneurship policies give a lot of strength to the economy. We started at 25,000, and now the Sensex has reached 75,000,” Modi said, referring to the sharp rise in the share markets during the NDA government’s two terms since 2014.

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The more common citizens enter the stock market, the more strength it gives to the economy, the Prime Minister said. “I want the risk-taking capacity of our citizens to grow.”

Modi’s assertion about the markets follows similar assurances from three senior cabinet ministers regarding market stability. Last week, addressing a rally, Modi praised the growth of equity markets over the past decade, highlighting the significant increase in small investors and noting India’s status as the fourth-largest stock market with growing global investor trust. Union Home Minister Amit Shah and External Affairs Minister S. Jaishankar also addressed market concerns, attributing recent turbulence to election jitters and predicting a post-election rebound. Shah emphasised that past market declines were more severe and encouraged investors to buy stocks in anticipation of a surge after June 4.