The smart rally by stock markets in India with foreign portfolio investors (FPIs) bringing in an unprecedented Rs 34,053 crore in March, the largest monthly inflow in the history of stock markets, is a signal that fears of the Opposition giving the NDA a stiff fight in the upcoming Lok Sabha elections are receding.
With a seven per cent rally in March, the benchmark sensex has jumped to a new peak even as the country prepares for the polls. Clearly, FPIs are pouring in more money in stocks and taking positions in the futures and options markets in recognition of the fact that the ruling dispensation is on a firm footing.
With a plethora of opposition parties bound together by pursuit of power and a single-point agenda of getting rid of the Modi government without a viable alternative plan of action, there is apprehension that there would be instability if the BJP-led NDA is not voted to power. The Opposition divided between the Congress and its supporters on one hand and some regional parties on the other offers what seems increasingly as an inadequate challenge to the NDA which is relatively well-heeled and led decisively by the BJP.
That the FPI surge has come despite crude oil prices trading on the higher side in international markets shows the level of confidence of market forces for the future. The impending slowdown in the US with many seeing a possible recession by the end of calendar 2019 has provoked foreign investors to look at a potentially-stable India. There is no doubt, however, that FPI money is hot money and that it can exit at any hint of change in circumstances.
But as things stand, there is cause for confidence that the markets will hold to a substantial degree and that there worry.
