BJP’S LANDSLIDE VICTORY!By ASMA TORGAL

BJP’s landslide victory in state elections boosts market confidence, says ASMA TORGAL

IN A decisive triumph on December 3, 2023 the Bharatiya Janata Party (BJP) has emerged victorious in the State assembly elections of three states, which are widely considered as a prelude to the upcoming Lok Sabha polls in 2024. The BJP is now on course to establish governments in Madhya Pradesh, Rajasthan, and Chhattisgarh, among the five states that recently underwent elections. Meanwhile, the Indian National Congress secured a win in Telangana, and the Zoram People’s Movement (ZPM) emerged victorious in Mizoram.
Surpassing the predictions of political experts and exit polls, this landslide victory signifies a strong mandate for the ruling party. The outcome is anticipated to positively influence domestic equities, providing investors with a sense of assurance regarding political stability in the country.

Impact on the Indian National Developmental Inclusive Alliance:
THE setback for the Congress is expected to weaken its position within I.N.D.I.A. Regional parties like Trinamool Congress, AAP, JD (U) and others stand to gain the most from this loss. Consequently, these parties are likely to demand a greater role and more seats in the alliance. This shift could significantly undermine the alliance’s efforts to present a united opposition capable of forming a stable government. The BJP may exploit this situation, emphasizing the instability angle to garner votes.

Stock Market Reaction:
THE State elections held a special significance for market investors, serving as indicators of the nation’s political sentiment. Financial and energy stocks led Indian shares to reach new all-time highs. Key victories for the ruling party in the State elections, coupled with strong macroeconomic data and easing global interest rate expectations, fuelled the domestic market.
The next day on Monday, the NSE Nifty 50 index rose by 2.07% to 20,686.80 points, marking a record high for the second consecutive session. Simultaneously, the S&P BSE Sensex climbed 2.05% to 68,865.12, achieving a record close. Both benchmarks recorded their best session in 14 months and settled in the overbought zone.
Gautam Duggad, Head of Research, Institutional Equities at Motilal Oswal Financial Services, noted, “The BJP’s impressive performance, avoiding anti-incumbency and retaining a significant state like Madhya Pradesh for the fifth consecutive term, while regaining Rajasthan and Chhattisgarh, should provide them with a favourable tailwind for the 2024 general election.”
Market analysts believe that the election results will positively impact sentiment in several ways. Firstly, it reduces political risks for the next five months, enabling investors to focus on economic growth and development. Secondly, the BJP’s strong showing increases expectations of political continuity in 2024, fostering confidence in the market. Lastly, the diminished risk of populist policies in the run-up to the general elections should further boost the markets.
While acknowledging the unpredictable nature of the stock market, Motilal Oswal Financial Services anticipates a strengthening of market sentiment, with the likelihood of a pre-election rally now more pronounced. As attention shifts to the upcoming general elections in May 2024, the BJP’s victory lays a robust foundation for the party’s electoral prospects. However, the potential emergence of a weak coalition government poses a risk, potentially diverting focus back to redistributive policies at the expense of capital expenditure and supply-side reforms.
With at least four other states poised to hold elections concurrently with the national polls, the outcome of these elections will wield significant influence over the nation’s political landscape. The BJP’s success in the recent state elections is expected to generate a positive buzz in the markets, as investors anticipate a stable political environment conducive to economic growth and development.

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