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Insights on the 2019 Indian Election | EMQQ

Since the results of India’s election were determined, the Indian stock market, as measured by the BSE Sensex, has advanced by over 7%. Narendra Modi, the Bharatiya Janata Party candidate, was elected for a second term as Prime Minister.  The stock market’s advance seems to be signalling the hopes of investors that Mr. Modi will continue the path of economic reforms designed to make the Indian economy more competitive and rev up economic growth.

With the election results determined, what may Mr. Modi’s election mean for India?

Modi the Reformer 

Modi’s sweep in the 2014 elections was based on a platform of development. His slogan was “Sabka Saath, Sabka Vikas,” or “inclusive growth through collective effort.” He promised to wipe out corruption, improve infrastructure, and boost the economy.[1]  His success at realising these goals has not been stellar, according to the article.

And His Westward Focus 

A recent Wall Street Journal article dubbed Mr. Modi as India’s first openly pro-American head of government.[2]  The article went on to note that he has visited the United States three times in the past five years, urged President Trump to visit India, hobnobs with American billionaires such as Bill Gates and Mark Zuckerberg, and loves Twitter.  The two countries also share concerns surrounding Islamic terrorism and the growth of China.

Versus Modi the Populist 

However, with the most recent election, Mr. Modi and his party have taken a more populist view. During this campaign, they spoke less about development, jobs and reform and more about the issues that resonate with Hindu nationalists including banning the slaughter of cows, a crackdown on illegal immigrants, many of whom are Muslim, and ending special treatment for the country’s huge Muslim population, which makes up about 14% of the country, according to the Wall Street Journal.[3]  

And the Less Tolerant 

There is concern about intolerance toward practices which offend Hindu activists. The Wall Street Journal pointed out that there is increasing suppression of speech, and an ugly relegation of religious minorities to a politically and socially subordinate status and a brazen shift toward radical Hinduism.

Which Modi Will Rule? 

Recent stock market action may imply that many feel that Mr. Modi will ride his momentum to roll out the tough economic changes that India needs to produce strong economic growth and provide employment for the millions of young people entering the work force.  In fact, the Wall Street Journal highlighted that many feel Mr. Modi was riding the populist wave in an effort to get reelected and now that he has, he will turn his attention back to economic reform.

Something In-Between

Mr. Modi is liked by foreign investors for his efforts to streamline the economy, including a new nationwide goods and services tax, replacing some government subsidies with direct cash transfers and a new bankruptcy code, according to the Wall Street Journal.  More reforms are likely to occur and may be enough to propel the Indian economy and, subsequently, Indian stocks higher.  But, it may not be radical enough for some.

The Emerging Markets Internet & Ecommerce UCITS ETF (EMQQ) 

EMQQ has direct exposure to some Indian stocks such as MakeMyTrip LTD (MMYT). The fund also has indirect exposure to India through companies which have internet and ecommerce interests in India.

As of 28th June 2019, the Emerging Markets Internet & Ecommerce UCITS ETF (EMQQ) held 0.56% of its weight in MakeMyTrip LTD. 

Read our EMQQ whitepaper "The Great Confluence" here

Article Date: 1st July 2019. 

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