Nov 17 2018

Assembly Elections Verdict: Market Braceup For Volatility

India is an election machine and we take part in every election (assembly or general) with enormous zeal and passion. Before the memory of previous election and electioneering fades away, we have a new one already lined up. This happens more often than not.

Every election results do have an impact (good or bad) on the Indian financial market ranging from a knee jerk reaction to the one that holds on for some time. And the Assembly Elections 2018 will be no different. Flaunted to be as the semi-finals of Lok Sabha elections 2019, the assembly elections for the five states – Rajasthan, Madhya Pradesh, Telangana, Chhattisgarh and Mizoram will witness a high decibel battle between the Bharatiya Janata Party and the Opposition. Congress had won Mizoram in a landslide and holds Mizoram. Telangana is governed by TRS and elections are going to be held earlier than scheduled here.

When we analyse the assembly elections more closely we see that BJP is in direct contest with Congress in three states that is Madhya Pradesh, Rajasthan and Chhattisgarh. In Telangana TRS will fight it out with Congress and BJP and for Mizoram it will be interesting to see whether Congress is able to hold on to its lone fort in north east or not.

Congress do have an edge in Rajasthan as governing issues of BJP propped up on many occasions. In addition, the increasing cases of violence, lynching’s and communal hatred is likely to make it tough for the BJP in Rajasthan. In Madhya Pradesh, Chouhan got elected as CM for the third term and will be looking to repeat the performance to retain the chair so anti-incumbency will be a major factor here though the contest will be very close. Chattisgarh, also faces anti-incumbency, as BJP will be fight for fourth consecutive term. In Telangana, although TRS seems to be in strong footing it will face very tough competition from Congress as well as BJP. While, in Mizoram BJP seems to have an edge over Congress mainly because of the dedicated focus by BJP in all NE states.

Now, coming to the most important aspect for us about the verdict, the impact of result on Indian Financial Markets. It is very important for BJP to hold on to the states, which it is currently ruling that is Madhya Pradesh, Rajasthan and Chattisgarh. Generally, the assembly election results are not seen as a direct reference for general elections but this time it becomes very crucial as India goes for Lok Sabha elections just in about 4 to 5 months from now. The assembly result will matter much more this time and any problem for BJP retaining the states may send shock waves in the entire Indian market which doesn’t seems to be ready accepting the fact that BJP may actually lose in 2019. Counting of votes will be taken up together in all the five states on December 11. Indian investors, Companies need to prepare themselves much ahead as the volatility post results could be more than what it is being currently perceived.