With the Modi government, formally known as the National Democratic Alliance (NDA), all set to retain power in India, the benchmark indices Sensex and Nifty hit new highs of 40,000 and 12,000, respectively, in morning trade on Thursday.

However, later in the day the gains were pared back.

Sector-wise, all the indices on the National Stock Exchange, except Nifty IT, were trading with solid gains with Nifty PSU gains advancing the most (almost 7%), followed by private banks, up 3%.

In the broader market, the S&P BSE MidCap index was trading over 1.8% higher, while the S&P BSE Smallcap was up 1.65%.

Economic issues such as unemployment, economic stagnation, falling consumption did not matter in terms of affecting the decision of the electorate. The crippling effect on the economy from steps like demonetization of high-value currency notes in 2016 and implementation of the goods and services tax (GST) did not deter voters from maintaining their faith in the current government.

These two steps did not go down well with lower income groups, but they did not appear to change their voting patterns.

The government can now hope to go ahead with strategic reforms in the areas of land and labor laws without any significant fear of reprisal in terms of possible loss of votes.

It must be noted that the ruling Bharatiya Janata Party’s campaign this time was not about development, but more on security and religious issues, and it apparently struck a chord with the masses.

For the NDA, the second term provides an opportunity to ponder policies that did not work. Its ‘Make in India’ campaign needs a relook as industrial production has stagnated over the last few years.

Another major challenge will be non-performing assets in the banking sector, which rose nearly four-fold under the Modi government.

Recent data compiled by the central bank showed that banks’ gross non-performing assets rose from 3.8% of total loans or 2.6 trillion rupees (US$37.7 billion) on March 31, 2014, to 10.4 trillion rupees ($148 billion) or 11.2% as of March 31, 2018.

Indeed, the Modi’s government lackluster economic performance probably explains why the euphoria of the morning was a short-lived phenomenon.