Modi government and stock market: What lies ahead?

During the last four years of Modi government, the entire market cap of all Bombay Stock Exchange (BSE) went up by whopping 73% to Rs.145 lakh crore now from Rs.84 lakh crore as of May 2014. This is phenomenal considering the fact that the base of domestic market cap grew exponentially in this millennium – from a meagre around Rs.6 lakh crore in 2000 to over Rs.84 lakh crore in May 2014, a rise of over 14 folds!

Bold initiatives on economic reform front by the Modi government seem to have helped the capital markets to rise by such phenomenal levels by re-rating of overall market valuations. This bull phase in the market was not accompanied by any robust liquidity infusion from the FIIs, nor supported by strong earnings growth. While the previous UPA government period, the domestic equity markets attracted over Rs.4.80 lakh crore from the FIIs cumulatively, the same so far in this present government regime is around Rs.1.69 lakh crore, which is about 38% of what our markets received during the previous UPA regime (FY2010 to FY2014).