A Comparison in Market Performance for First Six Months of Modi in 2014 versus First Six Months of Manmohan in 2009

As of Nov. 26, 2014, Modi “Sarkar” (Modi’s government) has completed six months of leading the central government.  Since Mr. Modi assumed office, there have been high expectations from the corporate community, not just in India, but across the world.  This is represented by the barometer of the market in India: the S&P BSE SENSEX.  Over the past few months, the S&P BSE SENSEX has repeatedly recorded new all-time highs.  A similar atmosphere was seen in 2009, when it became clear that there would not be a hung parliament and that the UPA would form the government; the S&P BSE SENSEX recorded a steady increase, recovering from the bottom of the financial crisis.

The recent strong performance of the S&P BSE SENSEX has prompted close study of the market performance during the initial period of both of these Indian governments.  For this analysis, we have taken a base date of six months from the date of formation of each government.  As elections are announced, the market tends to be more sentimental, which is why we chose to begin measuring the performance from the election announcement date.  Exhibit 1 shows the key dates of comparison, from the election announcement until six months after the formation of the government.

ResultSource: Asia Index Private Ltd.  Charts and tables are provided for illustrative purposes.

The S&P BSE SENSEX showed higher returns during the initial period of Manmohan’s government (UPA 2009) than during the same period of Modi’s government (NDA 2014) (see Exhibit 2).  What is more interesting to note is that in 2009, from the announcement of the election results until the completion of six months of Manmohan government, S&P BSE SENSEX almost doubled.  During the same period of Modi’s government in 2014, the S&P BSE SENSEX had total returns of approximately 35%.

Exhibit 2: Total Returns 

Source: Asia Index Private Ltd.  Total Returns in INR.  Charts and tables are provided for illustrative purposes.  Past performance is no guarantee of future results.

Another interesting statistic to note here is that for the period from the election announcement through the completion of six months in office for each prime minister, the GICS® financials has contributed the most to the total returns generated by S&P BSE SENSEX out of any sector (see Exhibit 3).

Exhibit 3: Returns from Election Announcement versus Financial Sector

Results 2Source: Asia Index Private Ltd & Bloomberg.  Total Returns in INR. Charts and tables are provided for illustrative purposes.  Past performance is no guarantee of future results.

Furthermore, during the same measurement period for Manmohan’s government in 2009, there were 15 trading sessions in which the S&P BSE SENSEX closed above 3% (by total return).  Meanwhile, during the same period for Modi’s government in 2014, there was no trading sessions that closed above 3%.

Could these levels of performance simply be contributed to the expectations of the ruling government?  We believe the answer is no.  It would be unfair to attribute market performance exclusively to sentiments toward the expected or ruling government.  However, this is certainly one of the many factors.  Other factors that may affect the market may include growth rate, inflation, past market performance, growth of major economies across the world and more.

The posts on this blog are opinions, not advice. Please read our disclaimers.

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