Markets pricing in 400 seats for NDA in 2024 Lok Sabha elections: Analysts

The markets are already pricing in a victory for Modi-led National Democratic Alliance (NDA) in the upcoming general elections, and expect the alliance to achieve its 400-seat target, suggest analysts

The markets are already pricing in a victory for the Narendra Modi-led National Democratic Alliance (NDA) in the upcoming general elections later this year, and expect the alliance to achieve its 400-seat target, suggest market analysts.

The BJP, analysts said, already had a big boost ahead of the 2024 national elections in December 2023 itself, winning assembly elections in three key states (Rajasthan, Madhya Pradesh, Chhattisgarh), while Congress won Telangana.
 

“The 400-seat target for the NDA (in the general elections) now seems to be par for the course, and the markets are already pricing this in. There is not much enthusiasm, or a huge element of surprise regarding these numbers now. However, that this came from the PM on the floor of the Parliament (on Monday), does carry some weight. What’s more important is that the Bharatiya Janata Party (BJP) – and not NDA – does not fall short of the majority mark on its own,” said U R Bhat, Co-founder and Director, Alphaniti Fintech.

On Monday, PM Modi said in his last speech of this tenure in the Lok Sabha that the BJP would win 370 seats, while the NDA will secure a total of 405 seats in the upcoming 2024 Lok Sabha elections later this year.

“The markets had started factoring in NDA in the general elections back in December 2023 when it won key states in the Hindi heartland. An emphatic victory for the incumbent government is already priced in by the markets. In case they run up sharply ahead of the event, any disappointment can see a sharp adverse reaction,” said Andrew Holland, chief executive officer, Avendus Capital Public Markets Alternate Strategies.

The assembly elections for these states – Rajasthan, Madhya Pradesh, Chhattisgarh, Telangana and Mizoram -, meanwhile, were keenly watched given their geographic, demographic and economic importance. Together, these states account for 17 per cent of India's population, 15 per cent of its gross domestic product (GDP), and around 14 per cent of the seats in the lower house of the Parliament.

They were also the last state elections before the general elections scheduled for 2024, hence were seen as an indication of the political pulse of the nation.

“Based on the (recent) state election results, market concerns about the upcoming elections have eased. Also, in terms of underlying fundamentals, India has seen double-digit earnings growth with minimal consensus downgrades in recent quarters. While most factors remain favourable for Indian equities in 2024, valuation comfort has reduced, and we see limited upside,” wrote Kunal Vora, head of India Equity Research at BNP Paribas India.

Key risk

That said, the key risks for the markets from here on till the general election outcome back home is known, emanating more from global developments.

The US Fed in its January meeting voted to leave the key interest rate unchanged at 5.25-5.50 per cent, keeping the policy rate unchanged for the fourth consecutive time and dashed hopes for an early rate cut. The Bank of England (BoE), too, kept interest rates unchanged at a 15-year high of 5.25 per cent in its last policy meeting.

“A delay in rate cuts, growing political tensions and rising signs of deflationary conditions remain as a cause of concern for the Indian equity markets. Political tensions in many parts of the world continue to grow – Israel-Hamas conflict continues for the fourth month. After US attacks, Houthis vowed new attacks. North Korea carried out a third test of its cruise missiles in less than a week, firing the weapons into the waters off its west coast. All these are worrying markets,” cautions G Chokkalingam, founder and head of research at Equinomics Research.