It's now losing steam: Sensex under three years of Narendra Modi's rule

Far away even from the 'safe' estimate of 40,000 some firms made 3 years ago, it's now losing steam

Three years ago, when Narendra Modi stormed to victory in the general election, the benchmark Sensex and the broader stock market were throbbing in anticipation.

His high-octane campaign and pro-business manifesto caught the imagination of the business community in general, the cheer led by rosy reports from foreign brokerages. This column had written around the same time that year that Modi had formidable economic benchmarks set by his predecessor, Manmohan Singh, to beat. Including stock prices which rose five to six times during a 10-year tenure.

Local brokerages joined the party after May 15, 2014, when the beginning of the Modi era was officially confirmed, with the election results. One memorable one was by Karvy Stock Broking's portfolio management services arm. In early June that year, it issued a report predicting 100,000 on the Sensex by 2020. The report reasoned out its prediction, wild by even by the euphoric standards of that time, by saying such a number would require a compounded annual growth rate of about 25 per cent every year. This would not be difficult when earnings of companies grow at 15-16 per cent annually. Such earnings would then help the re-rating of Sensex valuation multiples.

Luckily, that report marked the end of the race and not the beginning. Some reports played safe, predicting 40,000 by 2017.

What the market has finally managed is a more modest number, a quarter less. At Friday's close of 30,188, the Sensex has gained 6,283 points or about 26 per cent. Though equities have received about Rs 1.25 lakh crore in foreign portfolio flows, there were 12-13 months of net outflow in these 36 months. So, the up-curve has not been smooth.

Yet, this buoyancy has been good enough to support scores of primary market issues. The government, being the largest issuer, is among the key beneficiaries. Through various modes of divestment, it has already raked in close to Rs 1 lakh crore. That is already close to what the Manmohan Singh government managed in 10 years.

On the regulatory side, merger of Sebi and FMC, the regulators of the capital and commodities markets, respectively, was a major achievement. And, the order penalising Reliance has raised hope. But, compensation and closure for scam-hit investors is elusive. There has not been any great new product worth its volume and the GIFT City is taking its own sweet time to deliver its gifts to the market.

Three years on, even what looked then like a safe prediction now seems a distant destination. Though the Sensex has topped 30,000, it doesn't seem to have enough steam for a march forward.

Several key drivers are facing a bumpy road. The banking sector stares at a Rs 7,00,000 crore stressed assets problem. Though the market seemed to have digested all the bad news there over the past year or so, fresh nasty surprises came in the form of under-reported non-performing asset numbers in private banks. The Bengaluru tigers are staring at a painful personnel restructuring, driven by the US government's protectionist visa policy. As dismissed workers look to unionise and take to the streets, a time-bomb is ticking in the information technology sector, which could create ripple effects across the economy.

Even as the nation waits to see the tangible benefits of various government measures such as Make In India, Skill India and Startup India, specific sectors such as meat, automobiles, hotels and pharmaceuticals have been facing challenges, due to missives by populist state governments and courts.

Despite all these headwinds, some analysts have gathered enough courage to predict 39,000 on the index by year-end. In such optimism lies the hope for stocks in the times of Modi.