Poll results give equity markets a timely boost
Indian equity markets are on a stronger pitch today. BJP’s victory in three states and stronger economic numbers released last week will raise the hope of governance continuity at the Centre, too. Share markets like political predictability and the state results are going to reaffirm the probability of the BJP remaining in power at the national level for another five years. Unless there is too big an upheaval globally, the markets are set for a strong performance in the run-up to the general elections.
The jitters in the markets over political uncertainty ahead of the 2024 elections have now metamorphosed into confidence. The BJP not only managed to prise Rajasthan and Chhattisgarh from Congress hands, it retained Madhya Pradesh with a clear majority. Industry and the markets have historically preferred the BJP over other parties partly because they believe the BJP pursues fiscally responsible policies and favours market reforms. The fact that the people in three states rejected the Congress’s promise of cheaper cooking gas, old pension plan and other populist measures raises the markets’ hope that the country would not walk the path of fiscal profligacy. The government’s policies have, so far, proved to be on point as the economy has managed to do reasonably well and some of its challenges have dissipated.
India is one of the fastest growing economies in the world, with the GDP growing at 7.7 percent in the first half of the year. The country’s purse is in a better shape with the fiscal deficit expected to come down to 5.7 percent by the end of 2023-24. The twin balance-sheet issues are behind us for now and the latest macro numbers showed that private investments might finally have begun to kick in. The equity markets will take faith in these and also in the fact that foreign portfolio investors may have to come back to gain from the country’s strong economic performance. The slowing down of China makes India an even more attractive investment destination. The markets had started showing an upbeat mood even ahead of the state election results. The Nifty has already regained the 2,000 levels. In the next few months, both the Nifty and Sensex would be looking at crossing a few more milestones.