NEW DELHI: A BJP win, a BJP-led coalition or a non-BJP government – – These three possible results could make the market swing up to 10 per cent either way, say analysts, as the first phase of voting kicked off on Thursday.
Past poll surveys have more or less managed to predict 2014 and 2009 election outcome, but were largely ineffective in suggesting the victory margin of the winning coalition.
This time, some of the opinion polls have pegged the BJP tally at 265-285, mostly in line with 2014s 282 seats.
To be sure, Dalal Street is baking in a BJP win, but a few analysts warn of the possibility of a 2004-like scenario when the BJP failed to keep power, much to investors' surprise then.
“The market presumably believes that 2019 will be no different (vis a vis 2014). Thus, a shock outcome may create considerable confusion and consternation in the market,” Kotak Institutional Equities said in a note.
The results will be out on May 23.
The market ultimately thinks in terms of probabilities, given the current valuations pricing in a Modi win. A negative surprise is seen to do more harm than a positive surprise to the market.
Swaminathan Aiyar, Consulting Editor, ETNow, sees 70 per cent chance of a BJP victory.
“The market has factored in a substantial likelihood, at least two-thirds likelihood of Modi or BJP wins. I would not be surprised if the market gets bumped up. Then, the BJP's chances go from 70 per cent to 100 per cent,” he said.
Nilesh Shah of Envision Capital said the Nifty50 may climb another 5-10 per cent from the prevailing level if the incumbent government gets a majority of its own.
He is of the view that the stock market will be fine if the BJP comes to power with outside support from allies. In that case, the market will be more neutral and may at most see 3-4 per cent upmove.
But a range of scenarios will open up if the BJP is ousted.
“It could be a Congress-led government or a Third Front with outside support of the Congress or even the outside support of the BJP. That case will be a doomsday scenario, where the markets initially will react like what happened in 2004 when the Vajpayee government did not get re-elected,” Shah said.
In 2004, the stock market had fallen close to 10 per cent on the election sRead More – Source