India’s Wild Ride To New Market Highs Hit A Stomach-Dropping Pothole

India’s Wild Ride To New Market Highs Hit A Stomach-Dropping Pothole
Theodora Lee Joseph, CFA

11 months ago2 mins

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What’s going on here?

India’s wild ride to new market highs hit a stomach-dropping pothole on Tuesday, as election tallies pointed to something well shy of a landslide victory for the ruling party.

What does this mean?

Indian stocks had been rallying hard, with the sitting prime minister expected to easily pull off a historic hat trick – securing a third term that would promise more infrastructure-led economic growth and investor-pleasing market reforms. Stellar economic news helped sweeten the mood, with India’s output expanding faster than any major rival. And the cherry on top: S&P Global Ratings took its first step toward an upgrade for the country’s credit rating, which would make India’s government bonds more attractive to global investors and lower its borrowing costs.

Nifty 50
Source: Google Finance

Why should I care?

Zooming out: Indi-yeah.

India’s got plenty of bright spots. It’s a core beneficiary of the global supply chain’s pivot away from China: analysts estimate that its exports will nearly double by 2030, which could be very good for the country’s stocks. But those shares already are among the priciest in Asia, and that’s got some people feeling cautious. What’s more, it was never going to be easy for the government to push through big reforms in property and labor laws – the changes investors view as crucial to India’s growth. And without a resounding win, those battles could become even harder.

Indian rupee volatility

The bigger picture: Political rallies.

India isn’t the only country heading to the polls this year: at least 40 national elections are on the calendar, impacting over 40% of the world’s population and economy. And, of course, that includes the US. But if ballot-year investing has you on edge, relax. History shows that stocks usually perform better post-vote than during the uncertain lead-up. Plus, US markets have a knack for bouncing back strong, no matter who wins. So while the political drama may have folks twisted in knots, your investments might just keep on thriving.

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