How Markets Have Fared After State Election 'Semi-Final' Ahead Of Lok Sabha Polls

The results of state polls before the general election do not have an impact on the national outcome, according to analysts.

Assembly Elections 2018.

Indian equity markets usually shrug off assembly poll results in the run-up to the general elections, going by historical data for the last two decades.

The so-called 'semi-final' round does not have an impact on the national outcome, according to analysts. The major mover in markets is the result of the general elections.

Stock markets rose on the day of the results, irrespective of the winner in December 2003, 2008, 2013 and 2018. Benchmark indices also advanced in the month following the results, except in 2013.

Exit Poll Cues

According to various exit polls, the BJP is set for a comfortable win in Madhya Pradesh, while it also leads in Rajasthan. The Congress is expected to retain power in Chhattisgarh, albeit with a smaller majority. The grand old party is also projected to win in Telangana.

Exit polls indicate welfare has not worked uniformly and the markets worry about such "seemingly unproductive spending" by governments, said Aditi Phadnis, political editor at Business Standard.

BJP wins in MP and Rajasthan would help the central government pass legislation in Rajya Sabha, said Chakri Lokapriya, managing director and chief executive officer at TCG (AMC) Advisory Services P Ltd.

Also Read: Exit Polls 2023: Congress Gets Chhattisgarh, Telangana; BJP To Sweep MP; Rajasthan Close

Here's the market reacts to state polls:

Also Read: India's Market Cap Above $4 Trillion Amid Positive Sentiment Ahead Of General Election

In 2003, the Bharatiya Janata Party registered wins in the state polls in MP, Chhattisgarh and Rajasthan, while the Congress secured Delhi. After the results were announced on Dec. 4, the Nifty gained 16.7% while the Sensex traded 15.56% higher over the course of the next 30 days.

Interestingly, the BJP victories in these polls motivated the then Prime Minister Atal Bihari Vajpayee to prepone the 2004 general elections, which his National Democratic Alliance lost. That upset pulled the benchmarks down by over 10% in the subsequent 30 days.

Ahead of the 2019 Lok Sabha elections, the Congress wrested the Hindi heartland states of MP, Chhattisgarh and Rajasthan from the BJP.

However, the same states were swept by the second Modi wave in the parliamentary polls five months later. Both indices saw over a 12% advance through the period.

State Elections Factored In

"Markets are not worried about the impending state elections and they have been factored in. It is expecting one state from the BJP and the rest non-BJP," Carnelian Capital's Vikas Khemani told BQ Prime.

The fund manager also said markets are not prepared for any change of central government come 2024 and expect a high probability of the BJP retaining power. "That is the fair hypothesis the markets are now assuming."

Watch the full interview below:

Also Read: Nifty's 2024 Performance Hinges On Lok Sabha Election, Bond Yields: CLSA

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WRITTEN BY
Shubhayan Bhattacharya
Shubhayan covers markets and business news at NDTV Profit. He has a keen in... more
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