When ever stock markets are favourable, Presidents and heads of governments the world over tom tom stock market returns to buttress their case. But unfortunately, 30 months after he took over amidst sky high expectations as India’s PM, Narendra Modi will be better off being silent on the BSE Sensex rather than talk anything about it.
In a few weeks when Modi completes exactly half his term, analysts will bombard you with different analyses. Some will quote Sensex too but you can be sure that no BJP man will do that. Stock markets are cold judges, unmoved my emotions and public expectations.
So let us look at Modi’s government through Sensex’s eyes.
- BSE Sensex closed at 24121 on 16th May 2014. As I am writing this piece, Sensex is trading at 27697. So a gain of 3576 points in 30 months. what is the annualised return ? It is less than 6%
- One may see that it is not so bad in view of the global macro headwinds. After all world economy is not doing so well and 6% returns are not that bad.
To verify this in perspective, lets go back to history.
- Sensex on 17th May 2004, when UPA came to power was at 4505 and after a 10 year stint on 16th May 2014, it was at 24121. What is the return on an annulaised basis ?? It is a staggering 45%
UPA critics will say that those days India enjoyed a tailwind of a global boom. But lets not forget that global boom ended in 2008 and did not last till 2014. However to verify this argument further, lets break up this period into UPA1 and UPA2.
- Sensex which was at 4505 on on 17th May 2004 was at 12173 on 15th May 2009, just a day before the election results were announced on 16th May. In fact Sensex jumped a record 2100 points on 18th May, after UPA was re-elected. But even taking the earlier figure of 12173, annualised returns for 5 years is 34%. Let us also not forget that the Sensex actually crossed 22000 mark in Jan 2008 and had lost more than 10,000 points in the next 12 months by the time UPA 1’s term ended. These 34% returns are despite that major crash.
- And in UPA 2, Sensex rose from from 12173 in 2009 to 24121 on 16th May 2014. annualised returns of 19.6%.
And there was only global gloom and not boom in this period of UPA 2. Even then, the Sensex’s annualised returns were almost 20%, which is more than 3 times what Modi’s government delivered in the last 30 months.
True, stock markets are not the only judges on a government’s performance and the market might pick up in the next 30 months ( I personally do not think that will happen) and close the Modi tenure in a much better way. But as we stand at half way mark, the Sensex has given a big thumbs down to the NDA government headed by Narendra Modi.