Market sees UP poll results as a litmus test for the BJP

Uttar Pradesh Chief Minister Akhilesh Yadav during an election rally in Amethi
Markets have been consolidating and moving in a tight range ahead of the outcome of the assembly poll outcome in key states of Punjab, Uttar Pradesh (UP), Goa, Uttarakhand and Manipur – to be announced on March 11. Analysts say the outcome could create distractions (or positives) for the government and will be interpreted as a referendum on the government’s demonetisation drive. 

The election outcome in UP (the biggest state by population), is being dubbed as the semi–final to the 2019 general elections, and appears to be heading towards a close fight.

Here is a quick compilation of what the leading market experts think about the possible outcome and its implication for the economy and markets:

Samir Arora, founder and fund manager, Helios Capital

We do not believe that outcome of state elections can be a big development for the market. Bharatiya Janata Party (BJP) is expected to win in UP (the only election that matters in this round, if at all). Even if BJP does not win, we don’t think that investors will project this to derive conclusions about 2019 national elections. If BJP wins as expected, the market will have more reasons to go up for sure CLICK HERE FOR THE FULL STORY 

Sonal Varma, managing director and chief India economist at Nomura

Uttar Pradesh is seen as a litmus test of Prime Minister Modi’s performance. Irrespective of the outcome, we expect government policies to stay prudent. A better performance for the BJP in the state elections would improve its seat tally in the upper house, although it is likely to remain below the halfway mark throughout its first term (until May 2019)

Also Read: Markets pricing in BJP win in UP, unfavourable outcome could see 10% fall

Porinju Veliyath, managing director and portfolio manager, Equity Intelligence

Markets will go up regardless of who wins the UP elections. Significance of UP elections is largely limited to media discussion, and beyond that it’s the outcome that will only motivate the government to focus more on development. Most significant achievement of our Prime Minister Narendra Modi to me is that he has brought development to the centre-stage of Indian politics. Political parties which survived on caste and religious identities in the past, are now being forced to talk development. Voters are smart today, they will reward performing governments and punish the non-performing ones. CLICK HERE FOR THE FULL STORY


Our latest checks in Delhi suggest that policy-making in India is likely to continue being ad-hoc if the BJP emerges victorious in UP with no specific over-arching ideology informing economic decision-making. Moreover, expert opinion is likely to continue being given a low priority with political motives guiding economic decisions

Manishi Raychaudhuri, Asia Pacific equity strategist at BNP Paribas

A favourable result for the ruling party in the State assembly elections would obviously be taken positively by the market. An unfavourable result, on the other hand, could ignite concerns about the feasibility of further reforms and of the path of fiscal consolidation that the Government has adopted. CLICK HERE FOR THE FULL STORY 

U R Bhat, managing director, Dalton Capital Advisors

The markets will cheer in case the NDA gets a majority in UP. As far as the policy making at the central level is concerned, what the markets will eye is how many Rajya Sabha MPs (Member of Parliament) it will have going ahead. A phenomenal majority, however, can be a sentimental trigger that can push the markets to all-time highs; though I feel most of the positives are already priced in. CLICK HERE FOR THE FULL STORY

Amar Ambani, head of research, IIFL

Impact of demonetisation will be a key narrative (besides other local issues). These ballots will also serve as an implied referendum on Narendra Modi's development agenda. Indisputably, outcome of the elections in the most populous state of Uttar Pradesh (UP) will pave the path for 2019 elections.

Jagannadham Thunuguntla, head of fundamental research, Karvy

These are the first high profile elections post-demonetisation, which can provide insight into electoral mood post such a massive event of demonetisation. UP is the most populous state in India. Out of 543 seats in Loksabha, 80 seats are elected from Uttar Pradesh (UP). These elections would not only be important in gaining majority in the upper house of Parliament (Rajya Sabha), but also serve as a litmus test for the acceptance of demonetisation by the masses.

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