The highly likely election victory of the BJP and its allies in the NDA alliance in India's general election with an improved share of parliamentary seats means prime minister Narendra Modi gets to enjoy another five years in power. It's a validation of his populist but also inflammatory and divisive approach to politics. 
Throughout Thursday and Friday (May 23 and May 24) we gained the initial throughts from fund managers and investment executives at asset owners on the results, what they mean for India's markets and economy and what the government should focus on next in terms of reforms. 
The below remarks are based on timeliness, with the uppermost the most recent received. All remarks have been edited for brevity and clarity. 
Rob Secker, investment director
M&G Investments

“Since Modi swept to power in 2014 the Indian stock market has become more of a macro, than a micro, led market. Investors were drawn to the market due to Modi’s reform agenda and his clear majority gave him the ability to push through his plans to modernise India.

"His first term in office was full of reforms; the partially successful demonetisation act and a unified sales tax arguably the most important as the country tried to increase its tax take by reducing the informal cash economy while a unified tax policy improved the ease of doing business. In 2019 Modi’s election campaign took on a more nationalist tone with rising tensions on the Pakistan border, which elicited a hard stance from Modi.

From an investment perspective, its arguably more of the same. Modi is liked by investors, the reforms that he has been implementing during the first term should continue – not least his commitment to modernise India’s infrastructure. As such, from a sector perspective the infrastructure related names are likely to continue to be favoured.

"However, whereas Modi’s election back in 2014 signalled a clear political regime change, resulting in a period of incredibly strong market performance, the election result this week signifies continuity. The Indian equity market has been a ‘market darling’ for a number of years now and is consequently expensive; it is currently trading towards the top of its long term average valuation. Therefore I would not expect this election result to spur markets upwards in the way we saw five years ago.”

Ramesh Mantri, director of investments 
White Oak Capital Management

“The strong decisive mandate by Indian citizens to the NDA government will ensure continuity of existing reforms process and also embolden PM Narendra Modi to accelerate India's transformation into a more market oriented economy.  It is India's opportunity to dismantle its archaic laws, carry out major structural reforms, further improve the ease of doing business and free up resources from inefficient public enterprises to aggressively invest in both infrastructure and human resources.  

“An environment conducive to enterprise will improve the dynamism of the economy, create jobs, accelerate growth, and in the process also be rewarding to investors.”

Mark Konyn, group chief investment officer  
AIA Group 

"Once the dust settles investors will be looking for renewed momentum for economic reformation and a less divisive political agenda. Politicians from all sides have continued to reinforce their democratic principles post the election and the need for less divisive leadership.

"Reforms have disappointed during the first term of Modi’s government but a meaningful majority and a refreshed agenda is raising expectations of a pro-growth outcome."

Regional chief investment officer (requested anonymity to be interviewed on topic in depth)
International life insurance company
"I was expecting the incumbent to come back; the surprise was in the numbers [of his alliance's victory]. To be honest, this was not a party election, it was a presidential election. From what I’ve seen in interviews it was all about [Prime Minister Narendra] Modi.
"It was a very emotive polarised election, and it caused a lot of people a lot of angst in terms of the new India that Modi has ushered in since 2014. Some really key issues were not heavily discussed much, such as jobs, the agriculture sector issues even retail sector issues.
"The good thing this government has done is keep inflation down. It's managed at least the perception of the economy very well; it's been quite a well stage-managed exercise. But India is facing huge challenges overall. And now the noise and dust and heat of the elections is over I think they need to sit down seriously and look what to do.
"One problem with this government has been that it's heavily centralised, and while some conceptualisation of some ideas was good the implementation was not so. I didn't agree with demonetisation but it was badly implemented; the GST conceptualisation was quite good but implementation was bad. And India has an entrenched bureaucracy and it should have been asked more about implementation. 

"The government also needs to improve its governance and regain confidence about its numbers. Twenty years ago foreign investors had a questions about the reliabilty of India's macroeconomic numbers, but by 10 years ago it was offering reasonably accurate numbers whether you were talking jobs or GDP. But two years ago some of the methodologies were changed and now some of these numbers are, according to reports, not entirely accurate, and then began unravelling just before the election. 

"From what we can tell the economy is slowing by all accounts. Now India has a young, ambitious and socially active population, many of whom are unemployed. It's the complete upside of demographic dividend but if in five to 10 years they don't get to do something productive then there will be social unrest. The focus has to be economy, economy, economy. And implementation needs to be improved and that's not for one man to solve; it requires institutional issues.

"So the government should focus on macroceconomics, farming, industrial production and job creation. New age technology like WhatsApp and Facebook has had a huge impact, especially in urban and semi-urban areas, which has become aspirational for the younger generation, but if their desires are unmet it will cause problems for the government. 

"Some of my key positives are in education and healthcare. As an offshore investor we don't really get involved in investing in India. Should we invest? Yes we should. India is for the long term, like China. Sectors I'd want to look at would be the entire healthcare area, from pharmaceuticals to hospitals. Another area that's underexplored is water; i see a lot of stress there in the next couple of decades." 

Rukhshad Shroff, portfolio manager 
JP Morgan Asset Management

“The election has now been released and has seen incumbent Prime Minister Narendra Modi, and his governing party, the BJP, extend their majority and secure another term in power. To a large extent it has of course been an assessment of the tenure of Modi. 

"In economic terms, his forthright style was best characterised by “demonetisation” in November 2016 – a genuine shock whose impact is not yet fully understood. Other notable reforms during this past administration included the implementation of the goods and services tax (GST), and bank recapitalisation, which is a step in the right direction.  

"While continuity of prime minister will be helpful, in the longer run we see no particular correlation between which party is in power and the pace of GDP growth. What is more crucial is that over the past five years nominal GDP growth hasn’t fed through to earnings growth. The key reason is that the banking sector has been through a negative earnings cycle on the back of non-performing loans. Provisioning for bad assets is now at more realistic levels and capital positions are being rebuilt. Normalisation of financial conditions should result in an earnings rebound. 

"We remain of the view that India’s economy remains at an early cycle stage. Valuations may not appear cheap, with forward price to earnings (PE) around the five year average but above the 10 year average, but we think that is partly because the corporate earnings cycle is depressed. The long run growth prospects in India remain very compelling: we maintain a strong preference for high quality growth franchises which will continue to take market share over time.”

Paul Sandhu, head of multi asset quant solutions
BNP Paribas Asset Management 

“I think much of the noise around the India election was priced in already; and the additional potential volatility coming from the event risk concerning the election is over so on a risk adjusted basis India becomes better off slightly but the growth concerns before the election remain for asset allocators.

"Overall, we are short term positive for the market, see gains in its equity market and tightening spreads.”

Sunil Rohokale, managing director and chief executive officer
ASK Group
“Re-election with a higher majority enhances the mandate for the prime minister improves chances of some of the critical reforms pending from last term to go through. Topping the list will be an action plan for the credit system - especially NBFCs. Monetary easing to enable greater transmission of rate cuts will also be a high priority item on the menu.
"Expect a little bit more aggressiveness on divestments of PSU (public sector undertaking) companies, especially loss-making ones, as opposed to disinvestments. The Union Budget expected next month should contain a slew of measures around income tax reliefs and tax concessions to key job-creating industries.”
Sonal Varma, chief India economist; Aurodeep Nandi, India economist; Craig Chan, global head of FX strategy 

"This outcome is better than expected and promises a stable pro-reform government for the next five years."

Vinay Agarwal, portfolio manager
First State Stewart Asia

"We strongly believe that the results of the election will have little bearing on the long-term investment case for Indian equities.

"Firstly, Indian people and businesses are used to political change. Since India liberalised its economy in 1991, we have had several governments with different ideologies, political strength and, what is more, very different tenures as well. A government in 1996 lasted for only 16 days, while another ruled from 2004 to 2014. The current, right-wing government of Modi has an absolute majority in the lower house of parliament whereas a previous government had as many as 27 coalition partners with varied agendas.

"We would gladly use any kneejerk reaction as an opportunity to increase our holdings in companies."

Nick Payne, head of global emerging markets
Merian Global Investors

"The nature of Prime Minister Narendra Modi’s overwhelming victory is, in our view, positive for the investment backdrop in India. Modi is likely to continue to push forward his much-needed reform agenda, after seeing success in recent years with demonetisation, overhauled bankruptcy laws and unified goods and service taxation.

"At first glance, Indian equities currently look quite expensive; however there are some great companies that offer compelling opportunities for investors to tap into that exciting future. We like HDFC Bank and Godrej Consumer Products."

Sriyan Pietersz, investment strategist, Asean
Matthews Asia

"Developing results look like a significantly stronger victory than was expected [for BJP and the NDA Alliance]. The equity market will take this positively, though a surge on the order of 2014 is unlikely as a BJP win has been discounted by prices. We also note that forward multiples are demanding when viewed against the backdrop of a slowing economy and earnings undershoot.

"A single party BJP majority ... should ensure policy continuity and consolidation of the past five years’ reforms along with more rapid implementation of policies commensurate with the new mandate. Existing policy stances such as infrastructure spending, fiscal consolidation, low inflation framework of positive real interest rates and rate differential along with low food prices, and boosting foreign investment in manufacturing (Make in India) will likely continue.

"However, flagging economic momentum and the strong mandate from the rural sector is likely to lead BJP/NDA to deliver on promises of fiscal income transfers, which may lead to increased tolerance for wider fiscal deficits. Other areas of focus could include policies to simplify the goods and services tax (GST), ease conditions for small and medium-sized enterprises, accelerate banking sector reform, boost middle class purchasing power, and prioritise job creation.

"Importantly, a strong government might be good for the markets in the short run, but in the long run, transparency and accountability—better-nurtured in a coalition environment—appear better able to avoid drastic missteps that could send its economy backward." 

Uday Patnaik, head of emerging market debt
Legal & General Investment Management 
"Narendra Modi’s BJP-led NDA government looks set to make history in a dominant victory as the only non-Congress government set to return to power. Impressively, the latest trends show the BJP alliance potentially reaching 350 seats in the Lok Sabha out of a total 542 seats. With Modi’s BJP itself expecting to cross the half-way mark of 272 seats, optimism on India’s growth and reform story are set to continue. 
"With economic policies expected to progress (e.g., fiscal consolidation, infrastructure spending), this will provide comfort to both debt and equity investors. In terms of immediate market focus, the changes in the cabinet, specifically who receives the finance ministry appointment, will be important. Modi will be looking for support from the Reserve Bank of India to help arrest the recent slowdown in growth, and the market will also focus on further liquidity injections into the banking sector."
Krishna Kumar, portfolio manager
Eastspring Investments

“This election outcome is good news for investors as it spells stability and a continuity of leadership and crucial reforms. Overall, the economy appears to be in a much better position than in 2014 ... [averaging] above 7% over the last 10 years. Promoting growth, raising incomes (especially for farmers since the agriculture sector still accounts for 67% of employment) and creating jobs will be critical especially since India’s per capita income is still well below that of other large emerging economies. 

Tackling the trade deficit is [a] challenge. Exports have been hard hit by rising input costs following the GST launch in 2017 and rising oil prices have widened the trade gap.  Meanwhile the rupee ... [has] been one of Asia’s worst performers in 2018; further depreciation will put pressure on the deficit.

Indian equities in general have been in expensive territory for some time now, a sticky point for investors. The market remains vulnerable to earnings disappointment. The stocks that stand to benefit from a BJP-led coalition are consumption, information technology, private banks, housing and select mid-caps. Any deep market correction will present us with buying opportunities.

Sandeep Kothari, portfolio manager
Fidelity International
“This is a positive development for India. With a clear majority in the upper house of the parliament, the BJP has got a historic chance to take forward the reform agenda it had embarked in the last five years. Some of the tough economic decisions taken, such as sticking to fiscal prudence and inflation control, implementation of uniform GST and the new Insolvency and Bankruptcy Code had an adverse impact on growth in the last couple of years. 

“However, the government has got an unprecedented opportunity to build on the base it has created to revive the economy in its second term. Recent events such as the liquidity crunch in the non-banking financial sector had a short term impact on consumption. The market expects the new government will quickly address these issues and take economy back on the growth path.

“Given the ongoing clean-up in public sector bank balance sheets as well as the reduction in corporate debt levels, I expect private sector capex cycle to revive in the next 12 to 15 months. Overall, I expect that this historic mandate for a strong and decisive government will help take India’s reform process forward and improve the country’s growth prospects.”

William Foster, vice president, sovereign risk group
Moody’s Investors Service

“Any credit implications of the outcome of India’s general election will be determined by the policies adopted by the government in the next few years. These policies have yet to be formulated. At this stage, we expect the broad push towards fiscal consolidation to remain, although with greater policy emphasis on supporting low incomes.”

Kristy Fong, Asian equities investment director
Aberdeen Standard Investments

“A continuation of Prime Minister Modi’s structural reform agenda would provide a lift to the economy and to corporate India. It would also likely spell good news for stocks.

“We can expect the government to continue pouring money into affordable housing and transport infrastructure, which bodes well for the cement sector, real estate and potentially rural consumption. It could spark a renewed capital expenditure cycle. All of this would provide a cushion to external headwinds, including a deterioration in the US-China trade conflict and any surge in oil prices.

“Political continuity only reinforces our positive views on India, whose growth prospects are underpinned by a young population and expanding middle class. We see a huge opportunity to invest in companies with pricing power that sell to Indian consumers. The country boasts a diverse mix of well-managed domestic champions and offshoots of multinationals, supported by a culture of entrepreneurship and innovation. Traditionally strong IT and engineering skills also feed well into the digitalisation trend we see globally.”

This story has been updated from a live update to a reflection on fund manager and asset owner responses from May 23 and May 24.