There was broad-based rally with participation across sectors creating enormous wealth for investors but starting 2018, the rally got concentrated into select large-cap companies with under performance in broader markets.
Illustration: Uttam Ghosh/Rediff.com
India's stock market wealth grew by Rs 75.25 lakh crore in five years since Narendra Modi-led NDA emerged victorious in the Lok Sabha polls in 2014, with benchmark Sensex gaining 61 per cent during this time.
An analysis of the stock market movements from May 16, 2014 till date showed that the 30-share BSE Sensex jumped 14,689.65 points or 60.89 per cent.
The index hit an all-time high of 40,124.96 points in morning trade on Thursday, amid trends pointing towards a thumping majority for Modi-led NDA in the general elections.
The overall market capitalisation (m-cap) of BSE-listed companies has grown from little over Rs 75 lakh crore to Rs 150.25 lakh crore during May 16, 2014-May 23, 2019 period.
This represents an increase of Rs 75.25 lakh crore.
At close of trade on Thursday, the market valuation of BSE-listed firms was at Rs 1,50,25,175.49 crore.
The BSE benchmark index jumped 1,014.75 points to 40,124.96 during the day after BJP's strong showing in the Lok Sabha polls.
However, later it gave up all the gains and closed at 38,811.39, a fall of 298.82 points amid profit-booking towards the fag end of the day's trade.
The results of 2014 Lok Sabha polls were announced on May 16 and BJP had won 282 seats.
Subsequently, National Democratic Alliance (NDA), headed by Prime Minister Narendra Modi, formed the government.
"In the past 5 years, the stock market has made new highs and touched new milestones.
“Politics is at the crux of the current rally and stocks have risen only due to the euphoria of a Modi government coming back to power for yet another term.
"History has shown time and again that during elections, emotions always surpass rationality and it is this very sentiment that drives the markets.
“However, this sentimental rally is short-lived and eventually when the frenzy fades away, markets might witness a decent correction," Umesh Mehta, head of research at SAMCO Securities, said.
Jagannadham Thunuguntla, senior vice president and head of research (wealth) at Centrum Broking, said that in 2014, there was historic political mandate with single party winning clear majority leading to huge rally in equity markets in anticipation of major reforms.
According to him, there was broad-based rally with participation across sectors creating enormous wealth for investors but starting 2018, the rally got concentrated into select large-cap companies with under performance in broader markets.
"With the clear mandate coming in 2019 elections, there is a possibility that this divergence between large-caps and mid-caps will disappear; and participation may again become broad-based," he said.
Nilesh Shah, MD and CEO of Kotak Mutual Fund, said removal of political uncertainty is always welcome from a market point of view.
"Current mandate shows the maturity of voters in choosing a stable government.
“Now with that uncertainty behind, markets will focus on steps taken by the government to encourage investment and give push to consumption, which is hitting a soft patch," he added.
RIL is the country's most valued firm with a market valuation of Rs 8,46,751.88 crore, followed by TCS (Rs 7,72,728.58 crore), HDFC Bank (Rs 6,36,120.68 crore), Hindustan Unilever Ltd (Rs 3,79,028.92 crore) and HDFC (Rs 3,66,149.73 crore).
"Well, since 2014 the markets have done very well up 60 per cent in five years.
“This a is a very good performance by any standards, global or local," Sindhu Sameer, head of sales - Institutional Equities at Emkay Global Financial Services Ltd, said.