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After Goldman, CLSA goes gaga over Modi

November 10, 2013 10:00 IST

After Goldman, CLSA goes gaga over Modi

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Samie Modak in Mumbai

Two days after Goldman Sachs upgraded India on hopes the Narendra Modi-led Bharatiya Janata Party (BJP) would form the next government at the Centre, another leading foreign brokerage, CLSA, attributed the recent rally in stocks and the rupee to expectations that Modi would emerge successful in the 2014 Lok Sabha elections.

In his newsletter Greed & Fear, CLSA strategist Christopher Wood said, “Greed & Fear hears opinion polls are predicting the NDA (National Democratic Alliance) coalition, led by the BJP, could win between 187 and 195 seats in the general election…But perhaps, more interesting than the polls, which are notoriously unreliable in India, Modi is reportedly to be drawing six-eight times the crowds Rahul Gandhi of the Congress has been attracting in the past few days.”

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Photographs: Amit Dave/Reuters

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After Goldman, CLSA goes gaga over Modi

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The benchmark Sensex, which recently surpassed its previous all-time high, has gained 15 per cent to 20,666 from an 11-month low of 17,905 on August 21. The rupee has gained about 10 per cent since August-end.

“Indeed, so eager are crowds to see the charismatic Modi, Greed & Fear has read recent news reports that they have even been paying to see him speak. Normally, in developing countries, mobs are paid to attend such rallies,” Wood said.

On Tuesday, in a note titled ‘Modi-fying our view: raise India to Marketweight’, Goldman Sachs had said a BJP-led government might be beneficial for the investment demand pick-up.

Reacting to the report, commerce and industry ministry Anand Sharma said Goldman was indulging in political interference.

Market participants said such a retort to research reports by governments was unheard of and showed the Congress party was nervous about an unfavourable political outcome. Investors have blamed the Congress-led United Progressive Alliance government for the current downturn.

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Photographs: Danish Siddiqui/Reuters

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After Goldman, CLSA goes gaga over Modi

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Responding to the minister’s allegation, Goldman said it stood by its report, based on investor sentiment, adding it didn’t have any political bias.

In his report, CLSA’s Wood reiterated the stock market could see a “dramatic rally” if the “BJP candidate” could record a visible majority, a prospect thought to be inconceivable a year ago. “This is because business confidence will rise dramatically, and with it, the chances of a new investment cycle. If BJP gets to 190-200 seats on its own, it will be in a strong position to form a viable coalition government,” he said.

CLSA said the results of the four state Assembly elections next month would be a test of Modi’s momentum. “The BJP wave is apparently clear in three of these four state Assembly elections — Rajasthan, Madhya Pradesh and Chhattisgarh,” it said.

CLSA also said the rise in the stock market and the rupee might not necessarily play in Modi’s favour, as his electoral prospects would rise if the sentiment was weak due to the economic crisis or a weak rupee.


Photographs: Brendan McDermid/Reuters

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