....."market optimism had increased due to a possible victory by the Bharatiya Janata Party (BJP), led by Narendra Modi.
Modi was previously the chief minister of the "economically vibrant state of Gujarat" and is expected to "improve the economic prospects for the nation".
Fast forward five months and Modi's BJP has secured a landslide victory with a full majority -- the first time in 30 years that Indians have voted for a single party.
Modi's story is the quintessential tale of Indian success. The son of a tea vendor, Modi has had a solid and successful political career. He transformed Gujarat into one of the best-performing states in India.
The BJP win clearly illustrates the pro-growth and pro-jobs mandate that has been the focus of Modi's campaign, according to Morningstar India's director of fund research Niranjan Risbood.
"Modi has done wonders in Gujarat, making it one of the fastest-growing states in India with improving infrastructure facilities in power, water and roads. A lot of industries now prefer to move to Gujarat, thus creating employment for the youth," Risbood says.
The big question is whether Modi can replicate the remarkable success in Gujarat across the vast number of other Indian states and bring the country on to a sustainable growth track.
"I would be cautiously optimistic. Modi has promised to cut the amount of red tape for businesses operating in India and streamline the large number of outstanding infrastructure and industrial projects," Ibbotson Associates Australia senior portfolio manager Nimalan Govender says.
"While India is a united nation, its government remains decentralised and rapid change is unlikely. State governments have often delayed the national government's plans. The large mandate offered to Modi should encourage greater cooperation between state and national government," he says.
For Risbood, the Indian economic growth story of the past decade was really focused on three main pillars:
1) Consumption -- based on a rising young population and the rising urbanization of India;
2) Infrastructure -- mainly to do with new infrastructure projects in roads, ports, water supply, power and telecommunications; and
3) Exports -- mainly focused on the outsourcing-driven IT services and Indian pharmaceutical industries.
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On the back of those three drivers, the Indian economy continued to grow at 8 to 9 per cent for about seven to eight years.
Corruption and scams slowly put a brake on this growth, hampering 100 large infrastructure projects worth $120 billion.
Risbood and Govender highlight a number of key priorities for Modi and the BJP.
"One of the first priorities for the new government would be to clear these projects, which would get the investment cycle moving in India," Risbood says.
For Govender, a pressing priority for Modi is bedding down any concerns relating to current Reserve Bank of India governor Raghuram Rajan.
"Governor Rajan is a well-renowned economist and is widely respected by his peers. To date, he has adopted a steady hand at the helm of the Reserve Bank and remains focused on containing inflation at 8 per cent," Govender says.
"If Modi was to embrace the current governor, this would be a win-win situation for all parties concerned. By building a strong relationship with the governor, Modi can quickly gain credibility among world leaders."
A concerning issue
A more delicate matter is Modi's perceived Hindu nationalist ideology -- an issue of great concern according to a recent cover story in The Economist.
In particular, The Economist outlined its concerns over riots in Gujarat back in 2002, when Modi was at the helm of the state.
"I would say the environment when Modi was branded as a 'Hindu nationalist' was different to what it is today," Risbood says.
"What Modi has been emphasizing, even after coming to power, is development by taking all communities along with him. I think he has demonstrated this model for over a decade in Gujarat.
"The minority communities in Gujarat have also benefitted as it has led to employment and better economic prospects for all the population, irrespective of religion and caste."
Nevertheless, Ibbotson's Govender says this will be something of a challenge when dealing with these sensitive issues at a national as opposed to a state level.
"What is encouraging is that Pakistani Prime Minister Nawaz Sharif has been invited to attend Modi's swearing-in ceremony. While it is still early days, it shows Modi's intentions of engaging constructively with India's neighbour, which has a large Muslim population," Govender says.
If Modi can transform India into a growth story, ample investment opportunities will also emerge for international investors.
Risbood identifies a number of such opportunities in infrastructure and banking.
"Some of the mid-sized companies in the infrastructure sector continue to trade at more than a 50-60 per cent discount to their peak price and an improvement in the environment could see some of these stocks finding favour with investors," he says.
"Another sector that has been impacted has been the banks, which have been lending to these infrastructure projects where NPAs (non-performing assets) increased as these projects could not get completed.
"The NPA levels of banks are expected to move lower over time, thus making a case for investment in these banks."
Improving sentiment could also help the consumption story in India, improving the outlook for sectors such as consumer durables, automobiles, real estate and fast-moving consumer goods.
"I think from a global investing standpoint, it would be critical at this point in time to create a portfolio of stocks that is focused on improving domestic fundamentals -- be it in the consumption or infrastructure space," Risbood says.
