Structurally, the market has also changed, with wider retail participation offsetting volatility in international capital flows. The immediate triggers for the Sensex to touch 70,000 must include policy continuity, which the results of the state election declared last week are signalling. India’s remarkable recovery from the pandemic trough owes itself considerably to a mature policy response. Besides, the country finds itself in a more central position in a changing world order. It has unveiled a vision that places itself at the heart of sustainable and technology-driven change. Investors seem to be buying that vision, helped by steady class-leading economic growth.
The picture is not entirely clear, however. India may not be able to pivot rapidly enough away from domestic consumption to become an export manufacturing base. Unless Indian manufacturing moves out of the security of domestic consumption, the economy may not be able to sustain its current growth rates. It has primarily been jobless growth so far, and the formalisation of the economy is slow, given its size. Accomplishing an export turnaround in a weakening global economy that is turning increasingly protectionist will be a considerable feat. India must pull that rabbit out of the hat to have investors asking for more.
