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Why Market Experts Are Keenly Watching Ongoing State Elections

Here is why market experts are watching state elections keenly.

A trader sits next to a screen showing a graphic of Narendra Modi in Mumbai. (Photographer: Vivek Prakash/Bloomberg)
A trader sits next to a screen showing a graphic of Narendra Modi in Mumbai. (Photographer: Vivek Prakash/Bloomberg)

India’s stock markets cheered when Prime Minister Narendra Modi was swept to power in 2014. As the nation heads into the next general election in six months, Modi is likely to face a united opposition. And market experts are keenly watching the ongoing state elections as the results may offer a glimpse of what 2019 could throw up.

The possibility of a “weak and unstable” coalition would be a matter of concern for foreign investors, Jonathan Schiessl, fund manager at Ashburton, said in an interview with BloombergQuint. Yet, consistent policy making will be a bigger factor than the majority a government enjoys, he said.

Ajay Srivastava, managing director of Dimensions Consulting, said it doesn’t matter which party comes to power as investors are the lowest priority for political parties. Moreover, he said, coalition governments are more likely to take responsible decisions because survival is at stake.

You can have the most stable government and the worst decision called demonetisation being signed off by the RBI. Where does it leave the strong majoritarian government versus a poor economic policy?
Ajay Srivastava, Managing Director, Dimensions Consulting

People across 679 assembly seats (66 Lok Sabha constituencies) will vote in multiple phases and results will be out on Dec. 11. Marketmen said it will be like a report card for Modi’s performance in the last four-and-a-half years.

This is a semi-final before the Lok Sabha elections next year and will give an estimate of how people are responding to the Modi government’s policies, according to Ajay Bagga.

The 2014 election was won on lot of hope, promise, expectations which have not come through. Demonetisation was not thought through. GST has taken time and refunds have been stuck.  
Ajay Bagga, Executive Chairman, OPC Asset Solution

Watch the entire debate here