Impact of Delhi Results on Indian Share Market

By Research Desk
about 5 years ago

By Geetanjali Kedia

Aam Aadhmi Party (AAP) has had a clean swept at the Delhi election, with practically no opposition, winning 67 of the 70 seats, coupled with one of the highest vote shares of 54.3% in the history of Delhi’s political scenario. Moot question on everyone’s minds from retail investors in Mumbai to traders in Ahmedabad and brokers in Kolkata is, how will this victory of AAP, or rather the miserable defeat of BJP in Delhi affect the Indian Share Markets.

We believe the negative current will be short-lived. Most of the damage has already been priced in and further downside is limited – this morning itself BSE Sensex is up in the green. Any which ways, over the long term (read one year horizon), Delhi election outcome will not matter on the broader national platform. FIIs do not pay much heed to the political control in a small geography within India. As long as India, at the macro level, is steered well under strong leadership and the economy maintains the growth momentum it has embarked upon, the share market will be one of the most attractive emerging markets to invest in.

Infact one positive outcome of BJP’s poor show at the National Capital will make the party more cautious and shed its complacency, as it has been winning most of the state election since coming to power at the Center.

In the immediate future, watch out for the Budget! And a possible rate cut by RBI immediately thereafter.

PM Narendra Modi may personally intervene in the Budget preparation. Besides making it corporate friendly (as per his pro-development image), the Budget may offer sops for individual tax payers too, by rejig of tax slabs(threshold limit may not get increased) thereby putting more money in the hands of the people, which will lead to higher savings and higher consumption, as both will help to revive the economy..

Both Arvind Kejriwal and Narendra Modi are honest leaders. IIT Kharagpur alumni-Arvind Kejriwal will be under pressure to perform and probably undo the mis-deeds of the previous 49 day stint in office. A dynamic, visionary and an all-encompassing personality like Narendra Modi has already put India on the world map, since coming to power 8 months back. Although his 13 year winning spree (Gujarat and Centre) has ended dramatically in Delhi, the loss, although a morale dampener, will quickly bring the Government’s focus on bringing in reforms at a faster pace (Swaach Bharat Abhiyan and Jan Dhan Yojana are among the pet projects of NaMo Government so far)as also, of other reforms, effect of which must be seen, felt and realized by people in the next 3-6 months, as structural and long term reforms may not be able to appeal the larger strata of the society .

We advise that not too much must be read of the Delhi election results. While the citizens of Delhi have voted for a change, for a corruption-free state, we wish that Arvind Kejriwal led AAP live upto their promises in a sustainable and pragmatic manner, which can set as benchmark and yardstick for other states as well to follow and perform. Meanwhile, Narendra Modi and his Government should now be better focused on keeping their promises to the country, as also keeping an eye  on their performance tracker on a faster pace, as they will complete a year in office this May. 

 

 

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