And the data does support this argument. FPI equity flows, according to an ICICI Securities report, turned marginally negative ($0.1 billion) in January 2019 after remaining positive in November and December 2018. Among sectors, FPIs bought into the pharma sector and sold banks, industrials, metals and autos, the report says.
Poll outcome and markets
As regards the poll outcome and its impact on markets, one key issue according to Wood, is whether Bharatiya Janata Party (BJP) will be able to secure the mandate or not. On the other hand, if re-elected in a minority government, Wood feels it will cramp Modi’s style in terms of governing in a concentrated manner around the prime minister’s office (PMO).
That said, he feels whoever governs India for the next five years will enjoy the dividends from the significant structural reform implemented by Modi since 2014.
Some opinion polls suggest that although BJP
remains the frontrunner, it is losing momentum and even with the support of its coalition partners, National Democratic Alliance
(NDA) could struggle to make it past the simple majority mark.
A recent Nomura
report attached 22 per cent probability for the BJP
returning to power with an absolute majority. A win for the NDA, but BJP
losing majority is its best case scenario, to which it attaches a 40 per cent probability. A Congress (INC)-led government (20 per cent probability) and a 'Third Front' government (18 per cent probability) are the other options, according to Nomura.
"BJP’s losses come at the expense of gains, not just limited to the key opposition party, the Indian National Congress (INC) and its coalition, the United Progressive Alliance (UPA). It also comes against increasing momentum in favour of the non-national parties, which are now poised to play the role of kingmakers – with the key players gravitating towards INC to forge a non-BJP front," wrote Sonal Varma, managing director and chief India economist at Nomura
in a recent co-authored report with Aurodeep Nandi.