As Phase 5 of Lok Sabha elections gets underway, Prime Minister Narendra Modi, in an interview to a TV channel, played down the nervousness in Dalal Street street on the poll outcome, saying the Indian stock markets will break all previous records on June 4.
“You see, the day election results come out, and throughout that week, stock market programmers will get tired of the action,” Modi told NDTV. The Prime Minister said the last 10 years had seen the market hitting the 75,000-level from the 25,000. “The more common people invest in stock markets, the better for the economy. And the risk appetite of every citizen should rise,” he said, pointing to the rally in public-sector firms that underscored the Centre’s efforts pushing maximum economic reforms and pro-entrepreneurship policies to strengthen the economy.
The bourses have been turbulent since the elections began on April 19, amid concerns of a truncated win for the BJP. The Prime Minister’s statement follows an assurance by Union Home Minister Amit Shah to stock investors where he advised them “to buy before June 4”.
Nomura India cited recent opinion polls to suggest a BJP win and policy continuity post 2024 general elections. In terms of reform agenda for the next five years, Nomura sees a sustained focus on infrastructure spending and a manufacturing push, alongside fiscal consolidation.
“The government may focus on the more politically contentious reforms around the factors of production including land, labour and capital; judicial reforms; and simplifying direct and indirect tax administration, including bringing electricity, oil and gas and alcohol under the GST ambit. The government is also likely to further focus on improving the ease of doing business for foreign investment and laying the groundwork for next generation sectors,” it said.
MUFG Bank, on the other hand, noted that while it almost seemed like it was a “done deal”, with the overwhelming consensus by political observers and polls agreeing on a likely strong win by the incumbent BJP government. “As long as BJP wins a majority of seats in the Lok Sabha again (>272 seats), we think markets should still view the outcome of India’s General Elections positively over time. There could be modest knee-jerk weakness in INR FX and risk assets if BJP loses some seats and maintains a majority,” it said.
“Conversely, a greater seat share win by the BJP compared with 2019 (>303 seats) would increase the ability to pass more contentious structural reforms in land, labour and the agriculture sector, and will be perceived much more positively by markets, with INR FX and risk assets likely rallying in the aftermath,” it said.
If BJP comes to power, Mirae Asset said all eyes will be on the July Budget to see if there are some changes in direct or indirect taxation, MSP policy, and MGNREGA payments. In he long-term, the focus would be on infrastructure development, farm laws, skill development, and creating employment on the manufacturing side to spur demand from rural India, Mirae Asset Capital Markets said.
Last week, PhillipCapital said it sees a strong rally if the BJP-led NDA hits the much-publicised 400-plus target. “If a lower 300-330 seats for the NDA results in a knee jerk market reaction (a fall), we would treat it as a buying opportunity. A further worsening of voter turnout in the following election phases could have a bearing on election outcome and equities – so we would keep a close watch,” the domestic brokerage said in its note.