The landslide victory of the BJP has triggered waves of enthusiasm across India’s corporate sector and has kindled enthusiasm among the international investor community that the new government will deliver on the much-needed second generation economic reforms.
With the BJP-led NDA crossing 300 seats in an unprecedented surge for the saffron party, the rupee surged to its highest level in 11 months on May 16. Traders are hoping the rupee will hold in a 58.50 to 59.50 per dollar range for the next week.
The Confederation of Indian Industries (CII), India’s premier industry body, promptly welcomed the BJP victory.
The victory will “reaffirm India’s vibrant and dynamic democracy and would greatly help to revive growth and investor sentiments,” said Mr Ajay Shriram, president, CII. “CII has worked closely with NDA in its previous term in Government as well as at the state governments. We extend our full support to the new Government and greatly look forward to engaging with its leaders including Shri Narendra Modiji in the next five years,” said Mr Shriram.
“With a decisive mandate, the new Government could take the tough decisions that are urgently needed to revive economic growth. The first priority is to get the cleared projects operational. This is the quickest way to revive investment demand,” said Mr Chandrajit Banerjee, Director General, CII.
Top global financial services lauded the decisive mandate in favour of the BJP and Modi, widely seen as pro-business and reform-friendly, and hoped that his government will end years of policy paralysis and take tough decisions to bolster the fundamentals of the economy.
“India has delivered one of the most decisive electoral verdicts since 1984,” Deutsche Bank said in a research note. The political platform now delivered to the NDA is historic and should result in a simultaneous revival of investor, consumer and corporate confidence, the party said.
With the economy and the investment cycle at the center focus of the new government, equity markets are likely to react to the verdict with euphoria, the report says.
“Given that Modi has won a strong mandate on a campaign focused around driving higher growth, markets will likely continue to believe that the policy outline will be positive. Our view is that it will be,” UBS said in a research note.
“We remain bullish on Indian equities. It may be early to book profits,” UBS said. “We set our Nifty target for end-2014 at 8000.”
“We see the confidence among domestic and foreign investors returning to India & expect India to remain a very promising destination,” DBS Bank Head, Treasury and Markets Vijayan S said.
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