Reforms to continue thanks to BJP win in UP; Nifty can hit 12,000 by March 2018

The markets are likely to head higher in the coming week, with the Bharatiya Janata Party (BJP) headed towards a massive win in the key state of Uttar Pradesh (UP). The outcome for polls in Punjab, Uttar Pradesh (UP), Goa, Uttarakhand and Manipur could create distractions (or positives) for the government and will be interpreted as a referendum on the government’s demonetisation drive, analysts say.

The election outcome in UP (the biggest state by population), was being dubbed as the semi–final to the 2019 general elections, and appeared to be heading towards a close fight.

Here’s how market experts interpret the poll results and its implication for the government’s reform agenda and the markets:

SANDEEP NAYAK, ED and CEO, CENTRUM BROKING

The poll results will strengthen the Government's resolve to reform the economy and continue its tirade against black money. International investor confidence in the India story should strengthen further. The markets  should react positively in the near term paving the way for a new all time high on the Sensex.

DEVEN CHOKSEY, MANAGING DIRECTOR, KR CHOKSEY SECURITIES

It was mostly expected that the BJP will come to power in UP. However, with the BJP coming to power with such a thumping majority suggests that the reform process will accelerate in the Parliament. The opposition parties are getting reduced to decimals. That’s the good part politics. For any country to progress, there should be a constructive growth programme. Unfortunately, our opposition parties are following a destructive way of functioning in the Parliament. Now, the election results suggest that a constructive programme will happen going ahead. Given the growth potential we are assuming in the economy, I would not be surprises to see the Nifty50 move up 10% from here on over the next 6 – 12 months.

G CHOKKALINGAM, FOUNDER & MANAGING DIRECTOR, EQUINOMICS RESEARCH & ADVISORY

The outcome is beyond market’s expectation and will be a sentimental boost. The victory margin (as indicated by the leads) suggests that the market will remain in a long-term bull run. One can expect a stability for the next five years, provided the economy and corporate earnings pick up. Even without a majority in Rajya Sabha, the government could push through key reforms like the goods and services tax (GST) bill and the Insurance Bill. That apart, there was the demonetisation. Going ahead, I expect more such initiatives from the government.

AJAY BODKE, CEO & CHIEF PORTFOLIO MANAGER -PMS, PRABHUDAS LILLADHER

BJP's emphatic victory in the politically-crucial state of UP would embolden the Prime Minister in aggressively expediting key structural economic reforms that have been hobbling India's growth impulses. Mr Modi has achieved a golden mean by emphasising on economic reforms with equity-for-all as its fulcrum.

On one hand, he has focused on structural macro-economic reforms like fiscal prudence, inflation control and government-led infrastructure development in roads & railways, and on the other, he has given equal importance to pro-poor transformational economic policies that touch the lives of the marginalised & downtrodden cutting across castes and thereby broadened his party's support base through schemes like Mudra loans, LPG cylinders & housing-for-all.

Equity market would be rejoiced with this outcome and scale a new high ably supported by a torrent of domestic liquidity. Though valuations remain expensive markets would pin its hope on recovery of as-yet tepid corporate earnings over the next few quarters and the passage of GST.

A K PRABHAKAR, HEAD OF RESEARCH AT IDBI CAPITAL

People have voted in favour of the reform process. This was also the case in the recent Maharashtra civic polls. The election outcome, especially in UP, is a positive as the BJP has won a key state. In this backdrop, the government’s reform process will take a front seat going ahead. One can also see more initiatives like demonetisation going ahead.

There was speculation earlier of the government cracking down on dubious investments real estate and gold. These are two areas where government action can be expected now. The government will now have more courage to go ahead with its reform agenda going ahead.

The real market rally will start now, and I expect the markets to scale to all-time highs soon. If the Nifty50 index is able to breach its previous high of 9,119 levels, I expect it to hit 12,000 mark by March 2018.

VIJAY SINGHANIA, FOUNDER-DIRECTOR, TRADE SMART ONLINE

Markets are expected to break into a new zone with the Bharatiya Janata Party (BJP) achieving a landslide victory in Uttar Pradesh and Uttarakand. This win will help Prime Minister Narendra Modi more say in the Rajya Sabha and will take forward key economic reforms. We could see the Nifty-50 swing 150-300 points in the coming week.

MOTILAL OSWAL SECURITIES

Nifty50 is finding hurdle near its psychological barrier of 9,000 mark from last couple of days and it is just 2% away from its lifetime high of 9,119 levels, which was registered on 4th March 2015. Recently, it knocked near 9,000 mark at the beginning of the month by hitting high of 8,992. However, it never gave a daily close above 9,000; and if that happens would be a positive trigger sentimentally. A hold above 9,000 could start a fresh up move towards 9,119 and then 9250, while on the downside multiple supports are seen at 8,860 levels.