Landslide Victory Gets Modi Second Term as India's PM

The results of India's general election are in and Prime Minister Modi has secured a second term in office

Holly Black 23 May, 2019 | 5:19PM
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After 930 million people went to polling stations across seven phases spanning six weeks, the Indian general election results are in and Prime Minister Modi has won a second term in office.

The BJP has increased its majority and secured another five years in power – the first time since 1971 that a majority government has returned to a second term with a majority.

The BSE Sensex, the Indian stock market, surged in early trading on Thursday as vote counting began, and Modi looked set for success. It reached an intraday high of 40,100 before falling back to end the day down 0.76% at 38,811.

The market has been jittery in recent weeks amid fears of an uncertain outcome and a coalition government. Investors had been concerned that such a result could have seen the structural reform agenda that has been put in place grind to a halt.

Kristy Fong, manager of the four-star rated Aberdeen New India investment trust, says the result bodes well for housing and transport infrastructure, as well as the cement and real estate industries. She says: “[This] political continuity only reinforces our positive views on India, whose growth prospects are underpinned by a young population and expanding middle class.”

Gaurav Sinha, asset allocation strategist at WisdomTree, thinks the landslide victory could embolden Modi to push forward with tougher reforms. Already the Prime Ministers has implemented a nationalized Goods and Service Tax and removed high-denomination bank notes from circulation in a crackdown on fraud.

Some of these measures have held back economic growth in the past couple of years, points out Sandeep Kothari, portfolio manager at the Bronze-rated Fidelity India Focus fund. “But the government has now got an unprecedented opportunity to build on the base it has created to revive the economy in its second term,” he says. “The market expects that the new government will quickly address recent issues and get the economy back on the growth path.”

Vinay Agarwal, portfolio manager at First State, was more sanguine, arguing there would have had been little bearing in the long-term regardless of the result. Sukumar Rajah, senior managing director at Franklin Templeton Emerging Markets Equity adds that the result had been widely expected and therefore priced into markets, so expects the stock market reaction to be fairly limited.

Modi’s manifesto included a $1.44 trillion boost to infrastructure and $10.5 billion to be injected into the farming industry with the promise to double farmers’ incomes by 2022. There are also plans to further simply the Goods and Service Tax.

Rajah says: “We think investors should focus on fundamentals and improving earnings – elements that leads us to be optimistic about India’s long-term prospects.”

But fund managers say investors in the region need to be selective. After years of stellar stock market growth, the valuations of many Indian companies look to be relatively expensive. 

Rukhshad Shroff, investment manager at JPMorgan Indian Investment Trust (JII), likes high-quality companies with the potential to grow their market share over time. The trust invests in finance firm Housing Development Finance and UltraTech Cement among others. 

Nick Payne, head of global emerging markets at Merian Global Investors, likes financial services firm HDFC Bank and Godrej Consumer Products, which makes personal care products such as toiletries, soap and detergent.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
JPMorgan Indian Ord955.00 GBX-0.31Rating

About Author

Holly Black  is Senior Editor,


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