Impact on market: BJP win in Uttarakhand, UP may give short-term fillip

"Investors will give a premium to Indian markets for the likelihood of a long-term stability at the Centre and thereby consistency in policies,” said C J George, managing director, Geojit Financial Services.

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While the major indices are hovering close to their all time highs over the last few weeks, they have not been able to breach that.

The huge victory for the Bharatiya Janata Party (BJP) in Uttar Pradesh and Uttarakhand are not only expected to provide a fillip to the market in the short term but if market experts are to be believed this is going to have a long-term impact as domestic and foreign investors will assume that there is likely to be long-term stability in the government and governance at the Centre.

“Markets will love this and there should be a gap up opening on Tuesday. Even international investors will like the result. Investors will now take the 2019 general elections for granted and will assume that the BJP will win the next general elections. Investors will give a premium to Indian markets for the likelihood of a long-term stability at the Centre and thereby consistency in policies,” said C J George, managing director, Geojit Financial Services. He further added that market will also derive confidence from the fact that Prime Minister Narendra Modi has got the ability to mobilise public support even after he recently concluded the hugely disruptive demonetisation move, which created lot of difficulties for citizens across the country.

Some say that a big victory in Uttar Pradesh will also help the BJP strengthen its numbers in the Upper House of Parliament, even though it might not achieve a majority anytime soon. More numbers in the Rajya Sabha for the ruling party would mean that they would be in a better position to push their economic decisions in Parliament.

“Equity market would be rejoiced with this outcome and scale a new high, ably supported by a torrent of domestic liquidity. Although valuations remain expensive, markets would pin it’s hope on recovery of as-yet tepid corporate earnings over the next few quarters and the passage of GST (goods and services tax),” said Ajay Bodke, chief executive officer & chief portfolio manager-PMS, Prabhudas Lilladher. He further added that the BJP’s emphatic victory in the politically crucial state of Uttar Pradesh would embolden the Prime Minister in aggressively expediting key structural economic reforms that have been hobbling India’s growth impulses.

While the major indices are hovering close to their all-time highs in the last few weeks, they have not been able to breach that. In fact, Nifty has been finding hurdle near to its psychological barrier of 9000 mark from last couple of days and it is only two per cent away from its life time high of 9,119 which was registered on March 4, 2015.

The benchmark Sensex at the BSE closed almost flat this week. While it opened at 28,859 on Monday, it closed at 28,946 on Friday in anticipation of the poll results. Some feel that it may hit new highs now. “Nifty has been consolidating in between 8,860 to 9,000 zone from last thirteen trading sessions and is awaiting a
decisive range breakout to commence the next leg of rally. Now a hold above 9,000 could start a fresh up move towards 9,119 then 9,250 while on the downside multiple supports are seen at 8,860 level,” said Chandan Taparia, derivatives & technical analyst, Motilal Oswal Securities.