Chennai, June 2 (IANS) The return of Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) to power for the third time in succession, as predicted by various Exit Polls, augurs well for the Indian economy as it provides stability and continuity in policy-making, said experts and a broking house.
They believe that the return of NDA will calm down the investors’ nerves, as political and policy continuity will be good for risk assets in the immediate run and macro stability in the medium term.
“Even as Exit Polls are not definitive, the margin of error has lowered in the last two election cycles. Final outcome, if in line with exit polls, would likely calm investor nerves as political and policy continuity will be good for risk assets in the immediate run and macro stability in the medium term,” said Madhavi Arora, Lead Economist, Emkay Global Financial Services.
“Forex and rates markets will cheer the outcome, with the Reserve Bank of India (RBI) likely to juggle with the problem of plenty. The policy focus will continue to keep the Indian rupee aligned with the rest of emerging market Asia peers. Long bond positioning should be buoyed,” Arora added.
“Once the election event risk is over, all eyes would be on the budget in July, which could continue with the consolidation process while improving the budget internals,” Arora said.
According to Arora, there will be an improvement in deficit levels limiting the external shocks to India further via financial channels in case the global cycle turns adverse.
“In our baseline, as of now we expect GDP (gross domestic product) growth to moderate to 6.5 per cent in FY25E from 8.2 per cent in FY24 due to cyclical factors, but we reckon India’s higher growth potential would likely improve over the years and could put India on sustained path of 7 per cent plus average growth in this decade,” Arora said.
“The exit poll numbers are very strong for the incumbent government and I think markets may not have priced in such strong numbers and we could see some reflection of that on Monday opening trade,” said Narendra Solanki, Head Fundamental Research – Investment Services, Anand Rathi Shares and Stock Brokers.
Continuing further, Solanki said that the recently released good GDP growth data should also provide support to existing positive momentum.
Similarly, in a report, stock broking company Motilal Oswal Financial Services said, the victory of Prime Minister Narendra Modi/BJP augurs well for the economy and capital markets as it provides stability and continuity in policy-making with a single-party majority government, which will be expected to continue pushing its economic agenda.
“Equity markets displayed some anxiety and nervousness recently around the impending political uncertainty, which resulted in a sharp rise in volatility in April and May’24. With this clear verdict, markets will heave a sigh of relief, in our view, and go back to fundamentals/business-as-usual mode,” Motilal Oswal said.
