Sensex almost Doubles in Nirmala Sitharaman's First Term as FM. Next Stop: 1 Lakh!

Prime Minister Narendra Modi has shown his confidence in Nirmala Sitharaman by appointing her for a second term as the Finance Minister. Investors have reacted positively to this decision, appreciating the policy consistency, as evidenced by the approximately 93% increase in Sensex during her initial term. 

When Nirmala Sitharaman assumed the role of Finance Minister on May 31, 2019, succeeding the ailing Arun Jaitley, the Sensex stood at approximately 39,700. By the session on Monday before the new portfolio allocation was announced, the Sensex had reached a lifetime high above 77,000. The next anticipated milestone for the Sensex is the significant landmark of 100,000.

On Wednesday, Nirmala Sitharaman took charge of the finance ministry for her second consecutive term. She is expected to soon present the final Budget for FY '25, which will outline the priorities and direction of the Modi 3.0 government for Viksit Bharat. Upon her arrival at the North Block office, Sitharaman was welcomed by finance secretary T V Somanathan and other senior officials.

Sitharaman, recognized for advancing second-generation reforms during her previous term, is set to create a record by presenting her seventh consecutive Budget and sixth full Budget in a row. The full Budget for FY '25 is expected to be presented to the newly formed 18th Lok Sabha next month.

Shortly after assuming her role, Sitharaman's first significant reform was reducing the base corporate tax rate from 30 percent to 22 percent. This move aimed to stimulate the economy, which had been impacted by demonetisation and the implementation of GST.

There is no denying that the Indian economy underwent significant transformation under Sitharaman's leadership due to various reforms and policy adjustments. From consolidating ten public sector banks into four to maintaining fiscal prudence and simplifying tax slabs, Sitharaman successfully met market expectations during her first term.

"The Finance Minister's first term can definitely be rated 8/10 given the challenges faced on the macroeconomic front, both at the domestic and the global front, in terms of tackling inflationary pressures while, at the same time, ensuring growth remains a priority," said Aamar Deo Singh, Sr. Vice President, Research, AngelOne.

"Nirmala Sitharaman's first term as Finance Minister demonstrated a commendable balance between fiscal prudence and economic stimulus, especially amidst the unprecedented challenges of the COVID-19 pandemic. Her strategic implementation of the Atmanirbhar Bharat (self-reliant India) package and targeted support for MSMEs, healthcare, and vulnerable populations significantly mitigate the pandemic's economic impact," Suman Bannerjee, CIO, Hedonova, observed.

"However, her tenure faced criticism for imposing high tax rates, including the controversial surcharge on high-income earners and increased taxes on certain goods and services, which some viewed as burdensome during the economic recovery," Bannerjee added.

"The market reaction is neutral as it expects no drastic change but policy continuation. Sitharaman's reappointment maintains continuity in the government's economic policies and reforms," said Ravi Singh, the founder of DRS Finvest. "Her reappointment is expected to provide market stability, which will help reduce fear or volatility in the market, providing a stable avenue for investment. Investors will likely view her return as a positive sign, as it ensures policy continuity and reduces uncertainty," said Singh.

As Sitharaman embarks on her second term, both the Indian economy and the market have high expectations for her leadership.