Bull market: BJP’s 3S returns to main street to stimulate market sentiment

MUMBAI: The BJP’s stronger-than-expected showing in the state polls, besides reducing its chances of being a decisive force in the next Lok Sabha elections, has helped extend the rally in Indian stocks that have scaled a wall of global geopolitical concerns with perfect ease. This might help. In line with expectations of the federal government’s firm commitment to growth-oriented structural reforms.

Nifty, the most watched index in the world’s fourth-largest stock market, closed at 20,267.90 on Friday and could immediately surge to 20,500. As is the case with vertical increases in the value of financial assets, the broadest indicators are vulnerable to short-term corrections. However, the valuation may seem like it will put a strain on your pocketbook.

“The state election results have reaffirmed expectations about the strength of the BJP and this trend is likely to continue in the general elections as well,” said Rushabh Sheth, joint CIO, Karma Capital Advisors. “This is a positive indicator because markets prefer continuity and stability.”

The BJP defeated the Congress in the Hindi heartland states of Chhattisgarh, Rajasthan and Madhya Pradesh, sending 65 lawmakers to the lower house. The state polls are a gauge of the BJP’s popularity ahead of the 2024 general elections, when Narendra Modi will seek a record third consecutive term as the first non-Congress prime minister.

The BJP’s emphatic victory in three of the four states that went to polls on Sunday strengthened market expectations of a decisive popular mandate for the ruling party in the 2024 Lok Sabha polls. Such an election victory is also likely to boost investor confidence in the government’s growth-focused reform agenda built around manufacturing, further boosting stocks in capital-intensive industries such as infrastructure and power.

Power, infrastructure, energy
“The election results bode very well for the markets as there will be more stability in the government and its stance on policies, investments in infrastructure, renewable energy, etc.,” said Sandeep Raina, vice president of research at Nuvama Professional Clients Group. .

The texture of authority also alleviates any concerns investors may have about voter dissatisfaction with the incumbent. “BJP’s wins in Madhya Pradesh, Chhattisgarh and Rajasthan increase the party’s chances of winning more seats in the general elections. With Uttar Pradesh and Gujarat, where the BJP is strong, the chances of the BJP winning more seats also increase. The National Assembly is elevated,” Raina said. “These five states hold around 200 seats in the Lok Sabha.”

For the opposition Congress, only Telangana offered some solace on a disappointing Sunday.

“After anti-incumbency concerns were refuted, certainty that the BJP will return to power in the central elections has increased significantly,” said Niket Shah, fund manager at Motilal Oswal Asset Management. “The market will start to ignore that fact and further shorting of positions by FPIs (foreign portfolio investors) is likely to occur.”

FII shopping resumes
Falling US bond yields, weaker dollar and easing crude oil prices led FPIs to reduce their bearish bets on the Nifty last month, pushing the benchmark index up 4-5 per cent. These investors turned net buyers of stocks worth ₹9,000 crore in November after selling Indian risk assets over the past two months while covering short positions.

Shah said the market is likely to see a 5-7% rally in the next few days on the back of favorable global market signals. Sensex and Nifty are up about 7.5% since October 26, when the markets bounced back after a month-long decline from previous highs.

Brokers said caution is warranted if there is a sharp move, but momentum still favors the bulls.

“While some of the results have been discounted ex-ante, there is scope for further upside by discounting positive surprises,” said Dhiraj Relli, CEO, HDFC Securities. “However, we may see some profit-taking at higher levels as near-term uncertainty clears.”