What The End Of Bihar’s Grand Alliance Means For The Markets
Will Nitish Kumar’s resignation move the markets?
Hours after Nitish Kumar resigned as the chief minister of Bihar, the Bharatiya Janata Party (BJP) extended support to him and the Janata Dal (United) to form the next Bihar government. The move effectively brings an end to the Mahagathbandhan, or Grand Alliance, in the state.
Nitish Kumar resigned as the chief minister earlier in the day after Rashtriya Janata Dal (RJD) President Lalu Prasad Yadav ruled out resignation by his son and deputy chief minister Tejashwi Yadav from the RJD-Janata Dal (United) alliance government.
The resignation came just 20 months after the Grand Alliance came in power in Bihar and only days after differences cropped up between JD(U) and RJD as Tejashwi Yadav faced calls for his resignation. The Central Bureau of Investigation recently lodged an FIR against him and his family in connection with the land-for-hotels case.
What does the end of Bihar’s Grand Alliance mean for India’s stock market?
‘India’s Risk Premiums To Fall’
Bharatiya Janata Party's sweeping victory in the Uttar Pradesh elections in March had boosted investor sentiment which led the markets to rally, one which has still continued with some corrections. After the results of that election, India was getting valued on the expectation of long-term stability, said Ajay Bagga of OPC Asset Solutions.
Now this move in Bihar adds to the perception of political stability and will have an impact on India’s risk premium going down.Ajay Bagga, Executive Chairman, OPC Asset Solutions
Markets To Remain Unaffected?
Markets are driven more by economic outlook, company earnings, macroeconomic factors and liquidity, Sanjay Dutt, director at Quantum Securities told BloombergQuint. "None of these are impacted by this event", he asserted.
Any major impact due to this would only be political in nature and that too in 2019, he said.
It’s too early to assess the impact on stock markets.Sanjay Dutt, Director, Quantum Securities
‘No Immediate Impact’
Dutt's view was echoed by Hiren Ved of Alchemy Capital Management, who said there will be no immediate impact on the market.
Ved said that Kumar, a "shrewd politician", has taken his first step to distance himself from Lalu Prasad Yadav.
