The BJP campaign slogan ‘abki baar char sau paar’ had a halo effect on the stock market. The target of 400 seats was set as a psychological extension of the NDA’s massive 2/3rd majority in 2019 (352 NDA seats). Furthermore, the government’s enhanced leadership and performance during the COVID period contributed to this sentiment. Over the last 3 months, the stock market has been buoyant with an average estimate of 375 seats for NDA, based on the pre-election polls. However, as the voting progressed phases, the forecast moderated from the 350- 400 range to 300- 350 seats.
The forecast consolidation hinges on two critical factors. First, the moderation in voter turnout data reveals a 3% reduction compared to the 2019 elections during phases 1 to 3. This decline raises doubts about the strength of the ‘Modi Wave.’ Second, intensified regional politics has narrowed the initial forecast of a massive majority win, potentially impacting the BJP negatively.
In political science, a high turnout is recommended as it reflects the optimal performance of democratic rights. High turnouts suggest determination of voters in exercising their power. A significant increase in voting indicates the urgency of a change in political leadership, which is generally forecasted to be negative for the incumbent. However, it is necessary to understand the current issues and the voice of the nation to categorise the motion of the people’s rights, as observed during the Modi wave in 2014. This new voice led to a massive increase in voting rate by 820bps, from 58.2% in 2009 to 66.4%.
Assessing the current political economics there are no outright fundamental issues in India. The performance of the incumbent party is steadily rising both domestically and globally. India’s ranking as an economic power, global contributor and source of intellectual capital is steadily improving. Domestic fiscal prudence is in the best position since independence.
However, the most significant point to consider is regional politics, which has been depleting over the years. The primary challenge lies in the state-by-state contest. For instance, the situations are sluggish in states like Maharashtra, where common man belief on political socialization has disrupted due to political drama, the split of Shiv Sena and NCP, leading to a fragmentation of the political landscape. Maharashtra is a critical state for the NDA’s strategy, having secured 23 seats in 2019. Its alliance with factions of the Sena and the NCP is going to be tested, with the focus being on PM Modi’s charisma. This type of political collision continues in southern states, where BJP’s influence is weak. The regional distinction will be the determining factor for the total number of seats won by the NDA.
Simultaneously, the market seems to be overanalysing the marginal reduction in voter turnout. Because voter turnout has improved from phase 4 onwards. The overall reduction in voting rate, based on phase 6 data, is merely -1.4%, dropping from 66.9% in 2019 to 65.5 in 2024. The slight decline in voter turnout, particularly from Phase 3 onwards, became a significant point of discussion in the media when the announcement of data by the Election Commission was delayed by a few days. This change does not necessarily indicate a shift in voter preference. It could have both positive and negative implications for BJP and Congress. It’s also speculated that the initial drop in turnout is due to the severe heatwave, which continues to affect the northern states.
Significantly, the fervour of the ‘Modi Wave’ continues to persist. The total voter turnout till phase 6 is at 65.5%, which is considerably higher than the 58.2% recorded in 2009, marking an increase of 730bps. The slogan of 2014, ‘achhe din aane waale hain’, remains sincerely relevant. However, in the short-term, the stock market finds itself caught between the hyperbole of ‘char sua paar’ and the ‘low turnout’.
The market comprehends that the likelihood of a leadership change is negligible. Hence, no change in economic policy is expected and India economy prosperity is predicted to continue. Nevertheless, the excitement surrounding a majority win could potentially lead to some disappointment, especially if the total seats won by the NDA approach towards 300. In the event of a setback, the sectors that have performed the best over the past 5 years will be the most affected. These sectors include defence, industrials, manufacturing, infrastructure, and PSUs. However, If the total seat win by NDA is around 350, we don’t anticipate any abrupt reactions. If the current trend continues, these same sectors will maintain their momentum in the short to medium term.
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.
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Published: 02 Jun 2024, 06:03 PM IST
