Video: With a Modi government taking charge again, where will markets go from here?

In hindsight, navigating the election uncertainty may have turned out to be relatively easy for the markets. The real uncertainty begins now. On May 23, as it became clear that the Narendra Modi-led government would come back to power, investors quickly took money off the table. The Sensex ended the day at 38,811, down 298 points. Now, the wait for new policy announcements starts.

For the moment, it remains to be seen if the new government can lift India to a significantly new earnings trajectory. While Sensex earnings rose 4 percent during the first term of the government, the index returned 9.86 percent. While market watchers put that down to structural reforms–the introduction of GST, demonetisation–that the government ushered in, Abhimanyu Sofat, head of research at brokerage IIFL, points to the fact that the return on equity of Indian companies has been declining. This could in the short term put a cap on how high markets can rally.

Still, there are some who believe the market may hit a new high in the short term. Sensex 50,000 is on the cards according to Manish Sonthalia, CIO and Head - Equity PMS at Motilal Oswal Asset Management Company. Watch our Facebook live discussion for more.