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Bihar CM back into NDA fold: Markets cheer break in mahagathbandhan

Nitish Kumar quit as the Chief Minister of Bihar, ending the two-year old 'Mahagathbandhan

Puneet Wadhwa  |  New Delhi 

Bihar CM back into NDA

Nitish Kumar's decision to snap ties has come as a jolt to the Grand Alliance, or the 'Mahagathbandhan' as it was popularly known, but the will take this development as a long-term positive for the - led National Democratic Alliance (NDA) government, feel analysts.

Reacting to key domestic and global developments, the gained ground on Thursday, with the S&P BSE rallying nearly 220 points to 32,602 levels and the Nifty50 index gaining 66 points to 10,087 levels.

Also Read: Back as CM in 15 hrs: Nitish takes oath as CM, Sushil Modi as Deputy CM

In post market hours on Wednesday, quit as the Chief Minister of Bihar, ending the two-year old 'Mahagathbandhan' that included his party - the Janata Dal (United), or the JDU, Rashtriya Janata Dal's (RJD's) and the

The move, analysts say, will be seen as a long-term positive by the and will strengthen the government's bargaining power in the Rajya Sabha, the Upper House of Parliament.


Also Read: BJP's knockout punch: Notion of Opposition unity has been discredited

"The development will be a positive for the A loss in Bihar was the biggest setback for after his party formed the government in 2014. Nitish forming a government again and forming an alliance with the will give more fire power to the latter in the Rajya Sabha. This augurs well for the overall policy reform agenda of the government. It is a blessing in disguise for the markets," says A K Prabhakar, head of research at

Bihar election result in November 2015 was then being seen as an indicator of the BJP's / NDA's policies since it assumed power in May 2014. Putting up a stunning show, the JD (U)-led 'Mahagathbandhan' won a thumping majority in the Bihar assembly after inflicting a crushing defeat on the BJP-led NDA.

Also Read: BJP moves a step closer to Opposition-free India

"Nitish joining hands with the has strengthened Modi-led NDA in the run up to the general in 2019, especially in Bihar and eastern Uttar Pradesh. Two themes that will resonate well with the will be probity in public life and clean, effective administration and governance. Even if there are ideological differences, it will be a big positive if the alliance is able to deliver on reforms. All this will augur well for the markets," says Ajay Bodke, CEO and chief portfolio manager (PMS) at Prabhudas Lilladher.

Another key development were eyeing was the outcome of the US Federal Reserve (US Fed) meeting on interest rates. After a two-day meet, the US Federal Reserve kept key rates steady, which was in line with most analysts had predicted.

Going ahead, all eyes are now on the Reserve Bank of India's (RBI's) two-day meet on August 2, where most expect the central bank to cut rates given the recent consumer price inflation (CPI) data. That apart, corporate results, F&O rollover for the July series and the progress of monsoon will dictate market trend, analysts say.

Also Read: All eyes on RBI policy meetings

"We expect the RBI to cut repo rate by 25 basis points (bps) in its policy review on August 2, 2017. Incoming inflation readings have been softer than expected led by sharp dip in food inflation. What's particularly comforting is the continuous broad-based fall in core inflation over the past one year. While we do anticipate the spike in vegetable prices to lift inflation from the current level, overall CPI is still likely to remain at a comfortable level," write Kapil Gupta and Prateek Parekh of in a note.

 

First Published: Thu, July 27 2017. 10:40 IST
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