The market seems to have already accounted for a narrower BJP victory
As the final phase of India”s six-week-long national election set to conclude on Saturday, financial markets eagerly await the results scheduled for June 4. Pollsters and political analysts present different views on the possible outcomes, with voter turnout and apathy posing risks for Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP).
If BJP secures a stronger majority than in 2019, equity markets are expected to rally and the Growth-supportive economic policies, such as infrastructure spending and a manufacturing push, would drive this optimism, according to Rajesh Bhatia, CIO of ITI Mutual Fund.
The benchmark indices S&P Sensex and NSE Nifty 50 could see a 4-5% rise, predicts Abhishek Goenka of IFA Global, as per the reports. The rupee might appreciate to around 82.80 per dollar from 83.32, and bond yields could dip to 6.90%-6.92% from nearly 7%, says VRC Reddy of Karur Vysya Bank. James Thom of abrdn highlights the market”s preference for political stability and policy continuity under Modi”s leadership.
On the contrary, if the BJP and its allies win fewer seats than in 2019 but maintain a majority above 272, markets may experience short-term volatility but stabilize quickly. Gaurav Dua of Sharekhan notes that a seat count below 300 wouldn”t significantly alter market trends. Umeshkumar Mehta of Samco Asset Management concurs, suggesting a minimal impact on the rupee and bond yields. Vijay Sharma of PNB Gilts also expects negligible market reactions in this scenario on account of various reports.
A surprise loss for the BJP, resulting in a coalition government led by Congress, could trigger a market sell-off until the new government”s policies become clear. Mittul Kalawadia of ICICI Prudential Mutual Fund warns of a knee-jerk reaction due to potential policy shifts. Goenka of IFA Global foresees a 10% drop in benchmark indices, while Dua of Sharekhan predicts a steeper fall of 15-20%. Anindya Banerjee of Kotak Securities expects the central bank to intervene to support the rupee, with foreign outflows potentially driving bond yields up by 10-15 basis points.
(With inputs from Reuters)
