Wait to see a host of reforms by the new govt at the Centre
Exit polls predict a strong win for the Modi-led NDA, forecasting up to 400 seats, surpassing their 353 seats in 2019
image for illustrative purpose
The political stability will likely foster further economic reforms, such as the implementation of CBDC, ONDC, and de-dollarisation of payments for global trade. The outlook for India's economy is bright, with predictions of becoming a $12 trillion economy by 2035
A host of reforms are expected to be undertaken by the new government at the Centre on its formation on June 09. The seven-phase Lok Sabha 2024 elections concluded on June 1, and the exit polls for the same have predicted Modi 3.0.
NDA is forecast to win 370 seats (NDA had won 353 seats in 2019) according to the average of all exit polls. Today’s Chanakya, the only agency that predicted the 2014 seats correctly, has estimated 400 seats for NDA. Meanwhile, the highly respected and eagerly awaited Axis MY India Exit Poll (the agency that accurately predicted 2019 and also has a track record of correctly predicting 64 out of 69 polls to date) has placed the NDA in the higher range with 400 seats (361-401).
The victory of PM Modi/BJP augurs well for the economy and capital markets as it provides stability and continuity in policymaking 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 2024, says a study by Motilal Oswal Financial Services.
With this clear verdict, markets will heave a sigh of relief, in our view, and go back to fundamentals/business-as-usual mode. Fundamentally, India is witnessing its own mini-Goldilocks moment with excellent macros (GDP growth of 8.2 per cent in FY24 on the back of 7 per cent growth in FY23, inflation at 5 per cent, both current account and fiscal deficits well within tolerance band and a stable currency), solid corporate earnings (Nifty ended FY24 with 25 per cent earnings growth and FY25/26 earnings are likely to post 14-15 per cent CAGR), focus on manufacturing, capex and infrastructure creation, and valuations at 20 times one-year forward earnings. This verdict and consequent political stability and continuity in policy-making will act like an icing on the cake and keep India as the cynosure of all eyes, it adds. Talking to Bizz Buzz, Deven Choksey of DRChoksey FinServ said: “The prospect of unobstructed functioning of the parliament in the third term of Modi government is expected to deliver many progressive reforms in India.”
Politically, this majority for BJP and NDA also marks the end of un-united opposition. The period to 2029 will see an exit of two generations of opposition leaders, he said. Economically, India will grow much faster now; also under the brighter prospects of reforms like CBDC, ONDC and de-dollarisation of payments for global trade by India, he added.
Market is and will be excited as the reforms will produce predictable growth for India Inc. India is likely to attract premium dollar in the journey to $12 trillion economy by 2035. Narendra Solanki, Head Fundamental Research - Investment Services, Anand Rathi Shares and Stock Brokers said, “Overall it's positive for the markets in short as well as long term.” Also the recent released good GDP growth data should also provide support to existing positive momentum.
