Prime Minister Narendra Modi meets former Prime Minister Manmohan Singh, in New Delhi, on Sept. 2, 2018. (Photograph: PTI)

Will Modi Also Do For Investors What Manmohan Did?

Analysts are fretting over uncertainty about chances of Prime Minister Narendra Modi getting a second term as India heads towards a general election in five months. The concerns may be overblown.

That’s because Indian markets have surged in the last two decades irrespective of the government in power. If at all, Modi’s term hasn’t matched what investors gained during the tenure of Manmohan Singh.

Nifty 50 rose more than 40 percent from 1998 to 2004 when Atal Bihari Vajpayee was the prime minister for around six years across two terms. To be sure, the index only rose a little over 5 percent during Vajpayee’s only full term from October 1999 to May 2004.

The benchmark index surged 169 percent in Singh’s first term from 2004 to 2009, and then jumped 73 percent during his second term from 2009 to 2014. By contrast, it has returned less than 50 percent gains under the Modi administration so far.

 Will Modi Also Do For Investors What Manmohan Did?

Economic challenges faced by each of the last four governments were different. While Vajpayee had to battle sanctions from the U.S. after the nuclear tests, Singh’s second term coincided with the global financial crisis, record oil prices and also the taper tantrum that saw the rupee slide.

Modi faced a bad loan crisis at home, and his decision to roll out goods and services tax less than a year after demonetisation came as twin shocks. And emerging economies saw an outflow of capital as rates rose in the U.S. even as the threat of a trade war loomed. But Modi also received an oil bonanza as crude prices remained low for much of his term.

Here’s how inflation, rupee and crude fared since 1999.

 Will Modi Also Do For Investors What Manmohan Did?

Can Modi Make Up In Last Five Months?

Still, a little over five months are still to go in his term and stocks usually rise in the run-up to an election. Can Nifty 50 scale 13,000?

There’s a higher probability of the index going below 10,000 as opposed to hitting 13,000 on the Nifty, according to Saurabh Mukherjea of Marcellus Investment Managers. “We haven’t had double-digit earnings growth in India for five years now, And, you’ve got cost of money rising globally and paunchy P/E ratio in the stock market. Hence, you’ve an overvalued stock market.”

He expects global factors to play a bigger role than local in the index’s drift towards 9,500. “The global geopolitical setup is more tensed than I’ve seen in the last 20 years. We’re back to the cold war sort of spy thrillers era,” Mukherjea said. “If our elections are the local thriller, I think it’s the global spy thriller which will have a fundamental effect on our economy.”

Neelkanth Mishra, India strategist at Credit Suisse, isn’t that pessimistic but still cautious. “Local flows could be an important determinant for which way the markets move, he said. “While earnings growth in the next two quarters is crucial for the sentiment of the markets to rise, the Nifty in order to live up to the history of the last decade and go up to those levels before the next elections may have to tip its hat to global markets.”

(Updates an earlier version to correct the Nifty 50 returns during Vajpayee’s term)