Several analysts have bet high on the whopping victory of BJP in the recent legislative assembly elections to lower the market volatility related to general elections. The analysts are expecting a similar win for the party in the coming 2024 Lokhsabha elections, and thereby a boost in the investments considering the “voter sentiments.”
BJP wrestled three out of five states – namely Rajasthan, Madhya Pradesh and Chattisgarh with clear majority, while Congress managed to save its face with one win down South. The victory of BJP, surpassing even the exit poll estimations points in the direction of a tough time for the opposition alliance, going by the analyst reports.
“We believe that the BJP's victory across states: a) Raises its prospects in the upcoming Lok Sabha election… b) Should keep populism under check; c) Underlines the fact that caste census has not helped INC consolidate OBC votes,” said an analyst report from Antique Stock Broking.
BJP improved its tally in Chattisgarh to 54 from 15 five years ago, and to 163 from 109 in Madhya Pradesh. In Rajasthan, the tally zoomed to 115 from 73.
“While this verdict helps BJP to set a narrative in their favour — more importantly — it could impede welfarism/freebies culture as a means to achieve electoral victory or combat the anti-incumbency sentiments,” said IIFL securities adding that the current results are expected to work well in the way of “GDP growth and markets.”
The broker therefore expects a 12% growth in the NIfty index on average in the next three years.
IIFL analysts also said that the win hints at a lower “election risk” and thereby a lesser dip in the business with regard to the coming 2024 national elections.
Kotak Institutional Equities also agreed that the results will reduce election-linked market volatility and result in the market trading at “rich valuations” in the near term.
Like IIFL, Kotak Institutional also sees a reduced chance of the government now unleashing a volley of welfare schemes. “The BJP’s strong victory in the states will also reduce the probability of a big increase in revenue expenditure ahead of the 2024 general elections and fiscal slippage,” it noted.
Political Implications
The analysts also see the state assembly elections have some impact on the political landscape ahead of general elections in April-May, particularly in terms of demoralizing the opposition and drawing some smaller parties into the ruling NDA.
“ ..this win by the BJP in states is likely to get the opposition especially the Congress cadre demotivated, and possibly bring parties like the BRS closer to the centre,” said IIFL Securities adding that considering the obvious differences between alliance partners such as Samajwadi party and others, around “190-200 Lok Sabha seats could witness three or four-way contests in general elections, as against the intended two-way contest.”
They pointed out that BJP’s win in legislative assembly elections will not have any direct influence on the general elections, but could help it “set a narrative in its favour — similar to what the Congress did after a thumping win in 2018 state elections,” said IIFL Securities.
This will also give the NDA greater representation in Rajya Sabha, which could come in handy when it comes to passing critical bills.