With BJP pocketing three big states in the Hindi heartland, the markets are perfectly poised for a rally

In the recent past, many market experts have hinted that political risk is one of the biggest risks facing the Indian stock market. Even legendary investment guru Mark Mobius agreed, though he believes the probability of the BJP not winning the 2024 Lok Sabha elections is “very low”.

The results of the elections in the states of Rajasthan, Madhya Pradesh, Chhattisgarh, and Telangana announced on December 3 seem to have dispelled any lingering doubts. The BJP won decisive mandates in Rajasthan, Madhya Pradesh, and Chhattisgarh. The Congress won a comfortable majority in Telangana.

Most market participants now say the BJP’s spectacular performance has set the stage for a pre-election rally. “These results, branded as a semi-final to the forthcoming May Lok Sabha elections, will provide comfort to the markets as far as political stability is concerned,” stated a report by domestic broking firm Motilal Oswal Financial Services.

Incidentally, December 4, the first trading session after the election results, saw the benchmark S&P BSE Sensex gain nearly 1,384 points or 2 per cent, with the Nifty also rising 419 points.

“If the state elections can be treated as a semi-final, then the indications are that the final will be an outright victory for the BJP,” says V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services. “During the last five general elections, markets rallied in the run-up to the elections. The rally normally starts around six months before the elections,” adds Vijayakumar.

In a similar context, Jayesh Bhanushali, Lead–Research, IIFL Securities, says the Indian benchmarks could outperform all other major indices in the coming year. “Projecting a Nifty EPS CAGR of 12 per cent for FY24-26, we anticipate Nifty to outperform other major indices in the coming year,” he adds.

@ashishrukhaiyar