BJP's Maharashtra Victory: How It May Impact Investors and the Market
Following a strong electoral performance in Haryana, the BJP secured a significant victory in Maharashtra, which is expected to support the central government’s development agenda. However, Kotak Institutional Equities warns that the market may still face
Bjp VictoryMaharashtra ElectionsIndian Stock MarketKotak Institutional EquitiesInvestor SentimentReal Estate MaharashtraNov 25, 2024
The BJP and its allies won a staggering 233 out of 288 seats in the Maharashtra assembly, far exceeding initial expectations. This marks a remarkable turnaround from the party's weak performance in the 2024 Lok Sabha elections. Kotak Institutional Equities commented, 'The strong electoral performance of BJP in Maharashtra after its success in Haryana state elections should provide a boost to the central government’s legislative agenda and support policy continuity.'
According to Kotak, the central government is likely to continue its approach of incremental reforms, with a focus on ramping up capital expenditure (capex) and completing ongoing projects. The brokerage noted, 'The focus of the central government is likely to be on ramping up capex, which is running significantly behind FY25BE targets and finishing the plethora of ongoing projects.'
Indian benchmark indices opened sharply higher on Monday, with the NSE's Nifty50 index soaring by over 444 points, or 1.85%, to 24,351.55, and BSE's Sensex gaining more than 1,350 points, or 1.71%, to 80,473.08. Despite this positive sentiment, Kotak cautions that the strong electoral performance and the lack of any major state elections in the near term are likely to rule out any fiscal stimulus from the center.
Kotak further stated, 'While the central fiscal may continue to improve, an increasing shift toward populism in states may gradually weigh on India’s consolidated fiscal deficit.' The brokerage expects Indian equity markets to see a short-term boost in sentiment, which may help arrest the ongoing correction in the broader markets. Retail flows, which have been a key driver of post-Covid Indian markets, are likely to remain supportive.
However, Kotak notes that the valuations of the broader Indian market remain elevated, despite recent derating in headline indices. Aggregate earnings growth of the Nifty-50 Index remains decent, adjusted for downstream oil companies. The brokerage does not rule out further cuts to earnings estimates, given recent growth challenges, weakening consumption, elevated inflation, and continued disruption risks. 'As such, markets may continue to be tested in the coming weeks, post the likely sentiment-related near-term bump,' Kotak added.
With ongoing projects worth around Rs 8 lakh crore, there is significant growth potential, particularly in real estate and urban infrastructure. Mumbai, with its ambitious metro network, is a huge catalyst for future investment. However, Trivesh D, COO at Tradejini, advises caution regarding global pressures. 'The Indian market is still facing selling pressure from foreign institutional investors (FIIs), who have been exiting the market for nearly 11 months. Additionally, the dollar index is at a high of 106.93, which could signal underlying weakness in the Indian market, especially considering the global sell-off witnessed in October,' he said.
Frequently Asked Questions
What was the BJP's performance in the Maharashtra state elections?
The BJP and its allies won 233 out of 288 seats in the Maharashtra state elections, significantly ahead of expectations.
How does Kotak Institutional Equities view the BJP's victory in Haryana and Maharashtra?
Kotak Institutional Equities believes that the BJP's strong performance in Haryana and Maharashtra will provide a boost to the central government’s legislative agenda and support policy continuity.
What is the expected focus of the central government post-elections?
The central government is expected to focus on ramping up capital expenditure (capex) and completing ongoing projects, as well as continuing with incremental reforms.
What impact is the BJP's victory likely to have on the Indian stock market?
The BJP's victory is expected to provide a short-term boost in sentiment, which may help arrest the ongoing correction in the broader markets. However, the market may continue to face challenges in the coming weeks.
What are the key ongoing projects that could drive future growth in India?
Ongoing projects worth around Rs 8 lakh crore, particularly in real estate and urban infrastructure, and Mumbai's ambitious metro network are key growth drivers.
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