The BJP’s sweeping victory in the recent state elections in the Hindi heartland is anticipated to have positive implications for domestic cyclical sectors such as banks, industrials, power, property, and midcaps, according to global brokerage Jefferies.
The 3-1 outcome between the BJP and the Congress in four states, including the addition of Rajasthan and Chhattisgarh to the BJP’s league of governments, has set the tone for the upcoming general elections. This victory strengthens the likelihood of the current regime’s continuation at the Centre. The BJP’s unexpected win in Chhattisgarh and increased tally in Telangana, despite Congress winning the state, demonstrate the party’s political strength.
The election results surpass exit poll predictions and reinforce expectations of a Modi win in the 2024 national polls. Jefferies analysts note that competitive populism from both the BJP and Congress is evident in the results.
The better-than-expected outcome for the BJP also fuels hopes for policy continuity at the Centre beyond the 2024 elections. While the government has introduced some populist measures in the run-up to the elections, analysts at BofA Securities do not anticipate a significant impact on fiscal consolidation. Better-than-expected tax revenues could provide additional resources, keeping the fiscal deficit on track to achieve the targeted 5.9 percent of GDP in FY24.
Brokerage firm CLSA expects both central and state governments to address agflation (inflation in the farm sector) through price controls or subsidies.
Sunil Nyati, Managing Director of Swastika Investmart Ltd., emphasizes that India stands out for political stability and economic growth. The recent factors, including the state election outcome and robust GDP numbers, set the stage for a pre-election rally. Nyati suggests a good chance of the Nifty reaching the 21,000 mark in December, with the possibility of another 1,000–2,000-point rally leading up to the general elections.