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Nifty can slip up to 15% if Narendra Modi-led NDA fails to form govt: UBS

UBS expects the Nifty to move up 5-10%, crossing their upside (and recent peak) scenario of 11,800 in case the BJP gets a single-party majority

Puneet Wadhwa  |  New Delhi 

Narendra Modi
FILE PHOTO: PM Narendra Modi | PTI

As the 2019 Lok Sabha elections enter their final lap, with polling for only one of the seven seven phases left, all eyes are now on the outcome, which will be known on May 23. This uncertainty, coupled with other global developments, has kept the volatile in the past few sessions.

A recent report co-authored by Gautam Chhaochharia, the head of India research, along with Dipojjal Saha and Rohit Arora, expects the to slip 10-15 per cent if the Narendra Modi-led National Democratic Alliance (NDA) fails to form the government at the Centre. The projection is based on sharp reactions witnessed in 2004 and 2009 after general election outcomes.

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expects the to move up 5-10 per cent, crossing their upside (and recent peak) scenario of 11,800 in case the Bharatiya Janata Party (BJP) gets a single-party majority. On the other hand, a BJP-led NDA win (over 250 seats) could see the move up by 5 per cent to touch its recent peak, the report says. In case BJP-led NDA wins less than 250 seats, expects the to remain volatile in the near-term and wait for the government formation before making a directional call.

“The risk-reward is unfavourable, looking beyond the immediate market moves next week. The reality check of fiscal slippage and/or a negative growth surprise, awaits post this binary event,” UBS says.


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Most analysts expect the NDA to return to power, albeit with a reduced majority. The dent, they feel, will be caused by a loss of seats in Uttar Pradesh (UP). This is despite the 2019 election seeing a record voter turnout of around 67 per cent (55 – 56 million new voters relative to 2014 general elections), which would surpass the previous record of 66.4 per cent during the 2014 polls, according to reports.

"Increased voter turnout may indicate a strong sense of dissatisfaction that has led to voters coalescing to boot out the incumbent, although studies have disputed this causality in previous elections,” wrote Sonal Varma, managing director and chief India economist at Nomura in a recent co-authored report with Aurodeep Nandi.

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Their analysis suggests that increased voter turnout seems to be concentrated in states where the voters have been at the forefront of the ongoing rural distress and have recently expressed anti-incumbency views against the These states form the ‘Hindi heartland’ states for the

This view has also been endorsed by other brokerages such as Ambit Capital and CLSA, who see Modi returning to power for the second time around, but with reduced numbers.

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As regards markets, analysts at Edelweiss expect single-digit return from equities and project an upside of 7 per cent from the current levels till June 2020.

“Stock/portfolio selections should make an even bigger difference. Our opening gambit is play safe and selective. Recommend going more overweight on staples and quality and ‘recovering corporate’ banks, downgrade information technology (IT) to neutral; upgrade telecom; stay neutral on cement; and raise underweight on discretionary sector,” wrote Aditya Narain, head of research for institutional equities at Edelweiss in a recent note.

First Published: Thu, May 16 2019. 14:28 IST
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