Released June 14, 2024 | SUGAR LAND
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Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--The theme of recent elections seems to have been that the ruling party is still in power--but its foundations are weakened, and it will now have to rely on coalitions to govern. India, South Africa, and Germany lead that trend.
Momentary Surprise
Predictions had been that Prime Minister Narendra Modi's Bharativa Janata Party (BJP) would maintain its parliamentary majority, with 31 more seats than the minimum of 272, meaning it could lead without needing to form a coalition. Instead, the BJP won only 240 seats. Fortunately for Modi, he was able to retain leadership by forming a coalition government, which enabled him to also retain the majority of his existing cabinet.
Just before the election, Indian markets had risen because the polls gave them confidence in the continuity of the government, says Industrial Info's Vikrant Mall. "The sharp rise in the Indian Nifty 50 (consisting of 50 bellwether companies equivalent to U.S. indices like the Dow or S&P 500) and BSE (formerly Bombay Stock Exchange) on the threshold of the release of the actual election results was courtesy of all kinds of investors--mainly retail and international--seeing the exit polls saying BJP would retain full power, therefore pumping big money into the markets."
But when actual vote tallies began revealing BJP's slide on June 4, those markets "showed a catastrophic fall," comparable only to what had happened during peak COVID times. "Almost 2,000 points were wiped from the market's value within 30 hours of the release of the actual vote totals," he said.
A day or so later, after the market realized that Modi's basic government was still intact, that money flowed back in, closing on a stronger note June 6. "While foreign investors had pulled out based on those early vote totals, retail investors continued to pump money into the markets. That influx of retail investment resulted in stabilization and recovery after the June 4 market blood bath," Mall said.
The BJP's coalition government with longtime ally the National Democratic Alliance (NDA) settled fears for investors and for internal markets.
Stabilizing Various Market Sectors
Some of the market jitters had come from the construction industry that was counting on continued revenue from the government's heavy investment in infrastructure improvement. Having the new coalition assembled quickly has relieved those concerns, said Mall. "With a strong coalition government, hard infrastructure spending is going to be stable, or possibly even more aggressive. That includes steel, cement and mining, among others."
Retail is also breathing a sigh of relief, Mall said. Specifically, "Government stability means fast-moving consumer goods (FMCG) should also benefit."
For Industrial Info's Jugal Manaktala, public sector undertakings (PSUs) will be high priorities for the new government. He added that environmental, social and governance (ESG) is also in the mix, noting that "the government's commitment to improving air quality and reducing pollution in the steel and cement sectors will surely encourage investment in the technology and processing involved in those pursuits."
Both experts caution that one thing learned from the recent elections--across the globe--is that nothing is certain, and that the above observations consist of educated conjecture, assuming no new shocks either economically or politically.
India on the World Stage
Part of what's fueling India's commitment to infrastructure and mining is its concern about China's increasing press toward economic supremacy. Mall explained, "The government is aware that the only way to compete with China's dominance is to invest heavily in defense and infrastructure. For it to make a difference, that has to be a long-term commitment."
All investors hate uncertainty, and the Indian elections gave their markets a shock treatment of that last week. But after the dust settled there was less change than feared, and Industrial Info's Mall and Manaktal believe that Modi's third term will let him continue the vision and commitment for advancing the country's economic interests for the long term.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).
Momentary Surprise
Predictions had been that Prime Minister Narendra Modi's Bharativa Janata Party (BJP) would maintain its parliamentary majority, with 31 more seats than the minimum of 272, meaning it could lead without needing to form a coalition. Instead, the BJP won only 240 seats. Fortunately for Modi, he was able to retain leadership by forming a coalition government, which enabled him to also retain the majority of his existing cabinet.
Just before the election, Indian markets had risen because the polls gave them confidence in the continuity of the government, says Industrial Info's Vikrant Mall. "The sharp rise in the Indian Nifty 50 (consisting of 50 bellwether companies equivalent to U.S. indices like the Dow or S&P 500) and BSE (formerly Bombay Stock Exchange) on the threshold of the release of the actual election results was courtesy of all kinds of investors--mainly retail and international--seeing the exit polls saying BJP would retain full power, therefore pumping big money into the markets."
But when actual vote tallies began revealing BJP's slide on June 4, those markets "showed a catastrophic fall," comparable only to what had happened during peak COVID times. "Almost 2,000 points were wiped from the market's value within 30 hours of the release of the actual vote totals," he said.
A day or so later, after the market realized that Modi's basic government was still intact, that money flowed back in, closing on a stronger note June 6. "While foreign investors had pulled out based on those early vote totals, retail investors continued to pump money into the markets. That influx of retail investment resulted in stabilization and recovery after the June 4 market blood bath," Mall said.
The BJP's coalition government with longtime ally the National Democratic Alliance (NDA) settled fears for investors and for internal markets.
Stabilizing Various Market Sectors
Some of the market jitters had come from the construction industry that was counting on continued revenue from the government's heavy investment in infrastructure improvement. Having the new coalition assembled quickly has relieved those concerns, said Mall. "With a strong coalition government, hard infrastructure spending is going to be stable, or possibly even more aggressive. That includes steel, cement and mining, among others."
Retail is also breathing a sigh of relief, Mall said. Specifically, "Government stability means fast-moving consumer goods (FMCG) should also benefit."
For Industrial Info's Jugal Manaktala, public sector undertakings (PSUs) will be high priorities for the new government. He added that environmental, social and governance (ESG) is also in the mix, noting that "the government's commitment to improving air quality and reducing pollution in the steel and cement sectors will surely encourage investment in the technology and processing involved in those pursuits."
Both experts caution that one thing learned from the recent elections--across the globe--is that nothing is certain, and that the above observations consist of educated conjecture, assuming no new shocks either economically or politically.
India on the World Stage
Part of what's fueling India's commitment to infrastructure and mining is its concern about China's increasing press toward economic supremacy. Mall explained, "The government is aware that the only way to compete with China's dominance is to invest heavily in defense and infrastructure. For it to make a difference, that has to be a long-term commitment."
All investors hate uncertainty, and the Indian elections gave their markets a shock treatment of that last week. But after the dust settled there was less change than feared, and Industrial Info's Mall and Manaktal believe that Modi's third term will let him continue the vision and commitment for advancing the country's economic interests for the long term.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).
