Stock market: Sensex, Nifty may hit new highs as BJP eyes hat-trick in 2024 elections

With the BJP winning three states of Rajasthan, Madhya Pradesh and Chhattisgarh in what was deemed as semi-final to the 2024 general elections, hopes that the Narendra Modi-led incumbent government may get re-elected to power for the third term have risen on Dalal Street. The fact that the results reinforced BJP’s position as the dominant party in North India with consistent gain in vote share, could lead markets to hit fresh highs over the next few coming months, analysts said.

Past instances do suggest good chances of market gains in the run-up to elections. For example, Nifty gained 11 per cent in the six-months prior the 2019 general elections outcome. The NSE barometer jumped 19 per cent in the run up to 2014 elections. Similarly, it was up 31 per cent in six months prior to the 2009 elections outcome. In last eight general elections, the 50-pack index delivered negative returns only once. Besides, it also delivered positive returns six out of eight times, in the six-month periods post elections.

"Nifty has given positive returns (9-36 per cent) six months into the announcement of general election results on five previous such occasions," said Motilal Oswal Securities.  Nifty hit its record high of 20,291.55 on Friday. Sensex on the other hand, was on the verge of taking out its all-time high of 67,927.23 made in September this year.

The brokerage said equity markets were justifiably anxious about the outcome of state polls and what it portends for the 2024 general elections. With the outcome overwhelmingly in favour of the incumbent BJP, the confidence of the market in the current dispensation and political continuity post 2024 Lok Sabha elections will get a boost, it said.

Election outcomes in three states Rajasthan, Madhya Pradesh and Chhattisgarh were better than exit polls.  "The election results are positive for the market: the BJP returning to power in 2024 is seen to be positive for policy continuity and long-term growth. Other headwinds are also dissipating.  Geopolitical uncertainty is fading and crude prices are off their Sep-Oct peaks. Fears of a hard landing in the US have also faded in the last few weeks," said Emkay Global.

Emkay Global said while state elections have had little bearing on the general elections in the recent past, the decisive results have set the stage for the BJP to comfortably retain power in the 2024 parliamentary elections.

"It also shows the success of the BJP's tactic of projecting PM Modi as the face of the campaign, especially in MP – thus reinforcing its position on the front-foot. Fears that political compulsions would force the BJP to abandon fiscal prudence in favour of increased subsidies are now laid to rest. The track record under PM Narendra Modi indicates the opposite," it said.

While speaking at the BJP headquarters in Delhi, the Prime Minister Modi said: "Some people are even saying that today's hat-trick has guaranteed the hat-trick of 2024."

Nomura India said the state election wins for BJP should allay investor concerns while INC's losses can impair its chances of offering a strong leadership to the INDIA coalition.

"As some investors were worried that a poor showing by BJP in the state elections would increase the risk of more fiscal populism, the actual results should calm such fears. However, we believe that competitive populism will remain a theme for the 2024 general elections," it said.

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