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Election of Pro-business Government in India Sparks Market rally

Election of Pro-business Government in India Sparks Market rally

Benjamin Du,

Talking Points:

  • Friday’s election results showing Modi win sparked a rally in the Indian Rupee and the Mumbai Sensex.
  • Mumbai’s Sensex stock index is up over 7% this week and 14% since the start of the year over the prospects of the Pro-business Modi taking office.
  • Markets are hopeful that the new Prime Minister will be able to revitalize a stagnating Indian economy which has seen GDP growth slow to a mere 4.7% and a currency that has lost a third of its value since 2011.

Narendra Modi achieved a landslide victory in India’s election to take office as the nation’s new Prime Minister. Mumbai’s Sensex stock index and the Indian Rupee rallied as Modi’s Bharatiya Janata Party takes the majority in Parliament for the first time in three decades.

One of India’s largest stock indexes, the Mumbai Sensex, has soared over 7% this week in anticipation of the victory by the Pro-business Modi and has risen by 14% since the start of the year. The Indian Rupee has rallied 0.45% against the US dollar in the past week. Narendra Modi campaigned with a mandate to pass sweeping economic reform amid a stagnating Indian economy. From achieving impressive growth rates of above 9% in the decade through 2000, the growth in the Indian economyslowed to a mere 4.7% in the wake of the global recession while the value of the Rupee saw its value decline by over third against the US Dollar since 2011.

The Indian economy plays a vital role in the emerging markets and in the global economy as it makes up 5.83% of global gross domestic product in 2013. A strong performance from the world’s second most populous nation could contribute to recovery in developed nations similar to the impact that strong growth in China would have.

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Election of Pro-business Government in India Sparks Market rally

S&P 500 and Mumbai SENSEX (11/18/13 – 5/16/14)

Election of Pro-business Government in India Sparks Market rally

USD vs Indian Rupee since beginning of 2014

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.