Everyone is curious to know the outcome of the general elections. So do investment advisors and broking houses, as they have much at stake. Though most talk of the possibility of a BJP-led NDA government, all concur on there being no clear majority, as in 2014.
According to UBS, whose members criss-crossed States such as Uttar Pradesh, Madhya Pradesh, Rajasthan and West Bengal, there are three key takeaways: Modi was the centre-point of all discussions; no big wave visible either way with election activity perceptibly quieter than in 2014; and positive impact of populist schemes is not seen. Thus, the mean of opinion polls is predicting a BJP-led NDA victory, although with less number of seats than made in 2014.
“Our trips, if extrapolated and keeping in mind the limited anecdotal sample size, suggest potential for a surprise vis-à-vis opinion polls in UP (negative for BJP-led NDA) and West Bengal (positive for BJP-led NDA). Equirus Securities expects the NDA to get 246 seats and the United Progressive Alliance 152 and others 111.
Mayawati move
With just one last phase of polling remaining, Ambit Capital indicates that BJP could win 190-210 seats on its own and the NDA between 220 and 240, with UP causing a big dent in the total tally. Ambit Capital believes that the NDA will have to sign up with at least four large regional parties post poll to form the government at the Centre. Based on their ground check, the brokerage does not rule out the possibility of Mayawati-led BSP joining hands with Narendra Modi-led NDA in a post-poll alliance.
Federal elections have historically resulted in short-term volatility, said Bank of America-Merrill Lynch. MSCI India has moved 11-38 per cent (trough to peak) in the 40 days around results. “Indian equity volatility has already decoupled from EM, and should subside post the event. After a strong catch-up in March, MSCI India has underperformed EM in April, as oil prices rose. A favourable electoral outcome could lead to a small catch-up trade in India, we think. In our view, the large banks would be the most liquid way to express that trade,” it added.
UBS expects the market to react quite differently in four different scenarios: BJP single-party majority — Nifty could move up by 5-10 per cent, crossing its upside (and recent peak) scenario of 11,800; BJP-led NDA wins 250+ seats — Nifty could move up by 5 per cent to touch its recent peak; BJP-led NDA wins less than 250 seats — volatile near-term and await actual government-formation; and non-NDA government — Nifty could potentially correct by 10-15 per cent, if one goes by market reactions to the big surprises of 2004 and 2009.