Is a double engine good? 5 things to track for stock market investors after BJP-led coalition’s landslide victory in Maharashtra

After a dismal performance in the general elections last year, the BJP-led Mahayuti alliance won a landslide victory in Maharashtra, India’s richest state. The victory was decisive as the alliance bagged 235 of the state’s 288 seats, a mandate experts say will be beneficial for the state’s overall development, which in turn will be positive for stock markets in the near term.

Here are 5 things for stock market investors after the BJP-led coalition’s big win

1) A near-term market rally is expected

The resounding victory by the Mahayuti alliance is expected to give a much-needed boost to the market, which has recently been under pressure from global headwinds and sustained selling by foreign investors. Most pollsters were predicting a tighter race, but a better-than-expected showing by the ruling coalition would be a positive for the market.

“Maharashtra and Jharkhand election results will be a crucial trigger. Especially Maharashtra, where the NDA witnessed a lopsided victory is likely to further fuel the bullish sentiment,” said Santosh Meena, head of research at Swastik Investmart.

“Maharashtra being the second largest state in the country, such an order from here also strengthens the overall growth story of the country. So, I think it will be taken positively and it has come at a time when there is no impact on the markets. Director of Master Capital Services Palka Arora Chopra said.

Domestic markets ended higher last week despite geopolitical tensions and fresh concerns surrounding the Adani group.

2) Continuity in economic policy

The election result in the state is expected to provide political stability, indicating a consistent and very decisive economic policy, which will positively impact investor sentiment.

Palka Arora said, “Stability in Maharashtra will boost investor confidence due to continuity of pro-business policies, especially after uncertainty following previous coalition shifts.”
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3) Infrastructure expenditure

Mahayuti’s victory in Maharashtra bodes well in the medium term as the state has suffered from a fragmented political mandate in recent years, resulting in its performance on growth and infrastructure lagging behind other states.

With the BJP-led coalition now in office—both at the state and at the Center—the consolidated political capital should allow for better focus on state-specific issues, as well as expedite infrastructure spending that has fallen victim to the political climate.

4) Global factors are still important

Although near-term, the market will ultimately take cues from a host of global factors including US economic data such as PCE inflation, GDP growth rate and FOMC meeting minutes, which will play an important role in shaping investor sentiment. Commodities and geopolitical developments will also be important factors influencing global market trends.

5) Foreign flow

Foreign investors have sold Indian equities heavily in the past two months as they bought nearly Rs. 1.14 lakh crore and in November Rs. Over 30,000 crores worth of stock was dumped.

The results will likely have a positive impact on foreign sentiments who will see political stability at the center and state.

“The Modi government has proved its credibility to lead the coalition to victory, which will help strengthen the central government’s credibility for the next five years. Foreign investors will see this as a confidence boost in the center as well,” said independent market expert Ajay Bagga.

(Disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. These do not represent the views of Economic Times)