The Bombay Stock Exchange (BSE)
The Bombay Stock Exchange. Image Credit: PTI

Dubai: Indian equities are seen bucking the trend this week in emerging markets as strong mandate for Prime Minister Narendra Modi meant positive business environment.

The benchmark Bombay Stock Exchange Sensex index touched a record high of 40,124.96 on Thursday. The index closed more than 1.5 per cent higher at 39,434.72, outperforming the emerging market index. The MSCI emerging market index rose 0.16 per cent at end at 986.65 on Friday. The NIFTY index closed 1.6 per cent to end at 11,844.10, after hitting a record of 12,041.15 on Thursday.

“Indian equities were a notable exception as the incumbent Prime Minister Narendra Modi’s political party returned to power with a mandate bigger than it received in 2014. The election results have removed the political overhang and raised hopes that the new government will execute pending economic reforms at a much faster pace compared to its first term,” Aditya Pugalia, Director, Financial Markets Research, Emirates NBD said.

The MSCI emerging market index has shed 11 per cent since January 1, compared to 8 per cent gains on the benchmark Sensex index.

Analysts expect the reform momentum to continue for the time being.

“The stronger mandate handed to the Bharatiya Janata Party (BJP) would certainly quicken the pace with which Prime Minister Narendra Modi can implement his structural reforms,” Leong Lin-Jing, Investment Manager, Fixed Income, Asia at Aberdeen Standard Investments told Gulf News.

“It means we would be assured of a prudent attitude towards social spending, further privatisation of the public sector and continued efforts to simplify and strengthen the Goods and Services Tax (GST). Potentially, an enlarged BJP majority could also see renewed efforts to introduce the land acquisition bill — which would strengthen property rights — and even reform archaic labour laws that hold back productivity in the manufacturing sector,” Lin-Jing added.

Meanwhile, Indian rupee rallied 49 paise to close at 69.53 against the US dollar in line with a massive surge in domestic equities. Foreign investors continued to buy into Indian equities. They purchased Rs20.26 billion (Dh1.07 billion) on Friday.

Elsewhere, Saudi Tadawul index tumbled as the gauge was set to get included in the MSCI emerging market index. The Tadawul index closed 2 per cent lower at 8,360.19.

“As expected, there always is a downside just before inclusion. It is a normal correction for the market, but you could also add the geopolitical tensions that seem to have risen significantly over the month, in addition to the fluctuations in oil,” Issam Kassabieh, senior Financial Analyst at Menacorp said.

The Dubai Financial Market general index closed 0.30 per cent lower at 2,581.80. The Abu Dhabi Securities Exchange general index closed 0.05 per cent lower at 4,774.75.