Stock market, BJP: Modi 3.0 is here but investors eye TDP, JDU ministry allocations

With the Prime Minister Narendra Modi being elected as the leader of BJP-led NDA alliance, stock market will be eyeing the reshuffling of ministry portfolios post the formation of the NDA 3.0 government. Foreign brokerage Citi said it will be for the first time that PM Modi is likely to lead a coalition government either at the center or state -- where BJP on its own does not have majority.  "It will be interesting to see how the coordination with the two most important allies (JDU and TDP) takes shape both in ministry allocation and beyond," it said.

The Telugu Desam Party (TDP), which won 16 Lok Sabha seats under Chandrababu Naidu, may seek a Speaker's post besides health department, rural development, and transport portfolios, sources told India Today on Wednesday. JDU leader Nitish Kumar, whose party won 12 seats, is in Delhi and as per a media report he would be discussing his party's share in the Union Council of Ministers with the BJP leadership at an appropriate time.  Against a magical mark of 272, BJP managed to secure 240 seats while its NDA alliance settled with 292 seats. Narendra Modi is seen taking oath as PM on June 8, Saturday.

Kotak Institutional Equities, which hosted a political veteran, said the BJP may have to accept demands for Andhra Pradesh’s special category status and demands related to the Amravati issue, along with few key ministerial portfolios for the TDP and
JD(U).

TDP and JDU will likely support most economic agenda of the BJP but there could be differences related to social/political agenda, Kotak noted. "There will also be discussions within the BJP, along with other partners, to ascertain areas of improvement that may require some negotiations. In this light, technocrats within the government may find more visibility,"  it said.

Motilal Oswal Securities said the BJP-led NDA alliance is a pre-poll alliance, and hence it sees less friction in the government formation exercise. That said, after two consecutive terms of a clear single-party (BJP) majority, the coalition government is making a comeback, it noted.

"Unlike the earlier NDA coalition governments of 1998-2004 which had over 15 constituents with the BJP itself at 182 seats, this coalition will have a lesser number of constituents with the anchor BJP at 240 seats and thus potentially a more smoother approach to governance, in our view. Nonetheless, we expect the government to steer clear from the contentious issues such as Uniform Civil Code, One Nation One Poll and Farm Laws," it said.
 
IIFL Securities said a BJP-led majority government is almost certain, though it will have to accommodate demands from the testy 12 seat JDU and other partners. State elections will become more challenging, it said.

JPMorgan said that BJP has successfully run a coalition government from 1999-2004 and 2014-2024. It gave an example of 2004 elections when when a Congress-led government came in with support from left party, At that time, the stock market was worried of an unstable coalition.

"Benchmark indices hit lower levels post the result, but within six months markets had recouped all losses and staged one of the biggest bull runs up to 2007 led by strong economic momentum. Historically, the Nifty has delivered 9 per cent/8 per cent in the 3/6 months post general elections since 1991, showing that in the past a correction or dip has typically ended up as a buying opportunity over the longer term," it said.

That said, Morgan Stanley said unresolvable disagreements within the NDA coalition are not priced in by the equity market, for now.