BJP's Big Win In Assembly Elections: Here's What Analysts Say On Market Impact

The BJP's better-than-expected performance in the assembly polls has substantially reduced the perceived risk for the next year, as it looks highly likely to win the upcoming Lok Sabha election, according to analysts.

Investors who have been awaiting clarity are likely to start deploying their money, they said, as the sentiment was uplifted by the Bharatiya Janata Party winning three states in polls.

The benchmark indices opened at their fresh lifetime highs on Monday, continuing their gaining streak for the fifth consecutive session.

The BJP has secured majorities in the Hindi heartland states of Rajasthan, Madhya Pradesh, and Chhattisgarh, which strengthens its position as the dominant party in north India.

'Big Risk Is Out'

Vikas Khemani, founder, Carnelian Capital Advisors

The markets were not expecting this kind of win. There was a narrative that the BJP was expected to secure victory in one state, namely Madhya Pradesh, with a likely 50-50 outcome in Rajasthan. However, the outcome in Chhattisgarh was not expected by anyone, according to Khemani.

The perceived risk associated with this outcome has substantially reduced, and investors, both domestic and international, who were awaiting clarity will likely start deploying their money, he said. "And as a result of that, I think you will see good positive market momentum continuing."

Khemani considers Indian markets not to be expensive, given their economic fundamentals. "So, if your markets are not expensive, the big risk as perceived by the market for 2024 is out."

"The fiscal policy of the government (and) monetary policy of recent times have been very responsible, and that is what the market has been looking for consistently," Khemani said.

'Won't Be Surprised If They (BJP) Announce Abki Baar, 400 Paar'

Shankkar Aiyar, political economy analyst

The market exhibits a keen understanding of momentum, a factor that politicians may not fully acknowledge, according to Aiyar. "Fortunately for India, the GST collections are good, direct tax collections are good, and it can sustain."

Aiyar exuded confidence about the BJP's victory in the Lok Sabha election next year. "My hunch says that it's a done deal."

'Solid Foundation For Next Decade Of Growth'

Swarup Mohanty, chief executive officer, Mirae Asset Investment Managers (India)

"If you go back 20 years, India was a structural growth story," Mohanty said. "We are still a structural growth story."

"When you project the next 10 years, we are the only large economy that is set to double. That is the base case. There are no other countries that have data points like this," he said.

The key to this point is developing manufacturing. Based on the policy action, like the production-linked incentive scheme, that stage seems to be set. The shift away from IT was a dire need for India, according to Mohanty.

"When you put everything in perspective, this is now a solid foundation for the next decade of growth. And people not only need to believe this, (but) they (also) need to internalise this. And the best way to participate in this is through the capital markets," he said.

There are always pockets in the market where valuations are stretched. Currently, the larger companies are wide open for opportunities to invest. And that's the role of the fund manager—to seek the right opportunities. The biggest risk in the Indian market is sitting on the sidelines and not investing, according to Mohanty.

'Market Corrections Will Keep Coming In'

Mayuresh Joshi, head of equity research India, William O'Neil India

If investors find themselves in the right sectors, invest in the right stocks, and have a long-term horizon, there may be little cause for concern, according to Joshi.

Corrections will keep coming in, but those become fortunes for adding on to the good positions in the stock. Joshi emphasised the significance of utilising such a market to enhance existing positions within structural themes.

The market continues to hold structural stories, particularly within the infrastructure and capex themes. The transformation in the power sector, shifting from thermal to renewables, is expected to drive significant developments across the entire power value chain, Joshi said.

Auto ancillaries are poised to play a substantial role, making them a compelling sector. Battery makers emerge as an attractive investment choice in light of these evolving trends, he said.

'Policy Certainty Good Thing For Corporate Investment'

Ashwini Agarwal, founder at Demeter Advisors

"I think the economic strength might be the reason why you see an improvement in foreign flows, as indeed you have seen in November," Agarwal said. "The earnings growth is turning out to be a little bit better than what we were forecasting."

"If you look at the GST data for November, auto sales data for November, I think the real economy is doing well," he said.

Agarwal likes banking, financial services and insurance space; mostly on the banking side and less on the NBFC side. "I think that rerating should happen for reasons other than elections because I think the earnings momentum, the health of the economy, loans, growth, etcetera, everything is kicking in".

Policy certainty a good thing for corporate investment. It is a positive for defence, infrastructure and various other businesses, which are heavily dependent upon government policy outcomes, according to Agarwal.