It may not be the best thing to judge the prime minister’s tenure by the returns on the Nifty and the Sensex. But you are right that it is an important barometer of the economy and to that extent the stock markets are important. Capital markets are normally an outcome and the prime minister through the finance minister needs to just ensure five important things.

· It is hard to keep capital markets buoyant without growth so the big focus must be on economic growth. The latest 5% growth is too disappointing for markets and unless that goes up closer to the 7% mark, capital markets are likely to be disappointed. Solid economic growth is the key to wealth creation

· The government must continue with the financialization of savings, which begain with the surge in collections and flows into mutual funds. Consider the numbers; they are absolutely impressive. AUM of Indian mutual funds moved up from Rs.8 trillion in 2014 to Rs.25 trillion in 2019. Such a huge growth on a large base is truly commendable. Indian mutual funds collect nearly Rs.8200-8500 crore each month through systematic investment plans (SIPs), which is largely stable and represents retail money. Also mutual fund folios and demat accounts have seen a manifold increase. That is the kind of retail push that markets always wanted and the government must ensure that this retail push is sustained in Modi 2.0 also.

· It is essential to persist with the reforms process. Some of the reforms like GST and IBC have been substantially value accretive for a lot of stocks in India. Forget about the liquidity crunch and the pain in between. Modi 2.0 also means that the reforms momentum will continue at the same pace. Modi has already shown a penchant to take bold reforms like IBC and GST and even out of the box reforms like the cash ban. That is the approach markets look for and they do want someone who can experiment.

· Government badly needs to raise funds through divestment of PSUs and that can also be used to boost capital markets. The market expects that the decisive mandate for the Modi government for a second term will impel the government to be more aggressive in divesting government stakes. Strategic sale was spoken about but not pushed through. A combination of strategic sale and divestment will mean more quality paper coming into the stock markets and in the process it will reduce the bubble risk.

· Finally, you need to take care of the foreign portfolio investors. FPI have driven the direction of Indian markets for the last 25 years and they are truly happy about the return of the Modi government. For the flows to continue the government must sustain the reforms process and keep fiscal deficit in control. That assures that flows into India will continue at a rapid pace in the months to come giving the markets the much needed stability and support. The speed with which the government reacted on the FPI surcharge and the public holding is a good example.