Exit poll results on Rajasthan, MP to fuel stock market rally, says Emkay Global

Emkay Global on Friday said the exit polls of five states are leaning in favour of BJP for the key Hindi belts of Rajasthan and Madhya Pradesh (MP), even as Chhattisgarh and Telangana are seen as a tight race to top for the Congress. While the exit polls are not definitive, nor are state election results a perfect proxy for national results, Emkay Global said any advantage to BJP in key Hindi belts is incrementally positive and that the news would add more fuel to the stock market.

The results, if in line with exit polls, should bolster BJP’s position, Emkay Global said.

The five state elections have been touted as the precursor to the 2024 general elections. Exit polls are a better barometer of result than the opinion polls, and are able to direct the trend, even as they are not quite accurate in terms of seats, Emkay noted.

"A decisive BJP win will reinforce the consensus view that the party is on the front-foot for the 2024 general elections. This is likely to add another leg of rally to the markets, as policy continuity will be viewed as positive growth-shock in the medium term," Emkay Global said.

Emkay Global said most exit polls so far, of the five states, are depicting that the BJP has its nose ahead in the key states of Rajasthan and Madhya Pradesh, while Chhattisgarh and Telangana appear to have shown an edge to the Congress in a tight race.

"The Chhattisgarh lead should be a major positive for the Congress, as it has found it difficult to retain states in the last decade. Anti-incumbency seems to be catching up in Telangana, as KCR seems to be trailing after being the only CM since the state's inception in 2014. Mizoram exit polls, on the other hand, are depicting a close contest between the two regional parties—ZPM and MNF. A BJP lead overall is incrementally positive news for the markets. We expect the recent rally to continue in the immediate term, even though past trading sessions have partially discounted this news," it said adding that the impact of politics on markets over the next two quarters will be clearer after the final results.

While both Madhya Pradesh and and Rajasthan are seen as a bi-polar contest between the Congress and BJP, each Rajasthan election has traditionally seen the incumbents losing and paving the way for the opposition to form the government, Emkay Global said.

"To that extent, the Rajasthan exit poll is not much of a surprise despite the BJP not projecting any CM candidate. We note that Rajasthan election trends have shown that the BJP generally wins in Rajasthan with a big margin, whereas the Congress barely manages to scrape through.  Meanwhile in MP, where the Congress took the initial lead in the opinion polls, BJP is showing regained momentum in early exit polls – a strong sign of it overcoming anti-incumbency. The government's Ladli Behna Yojna for women seems to have aided a positive swing in the state," Emkay said.

Emkay Global said it will look for three key factors in the final results.

"First, the margins of victory in the states – if the BJP wins decisively, it will boost its already-robust chances of winning the 2024 elections with a clear majority. Second, the success of the BJP's tactic of projecting PM Modi as the face of the campaign, especially in MP – reinforcing the consensus view that the BJP is on the front-foot for 2024. Third, any deviation in spending trends in social sector schemes in the election outcome. While we think that fiscal prudence for the NDA government has been a non-negotiable issue, any market fears of government deviating from fiscal discipline will be pacified if the BJP wins the key states with a comfortable majority," it said.

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