Nifty faces up to 7% drop, volatility to spike if NDA loses Bihar: InCred

The report expects near-term volatility across indices, potential foreign investor outflows, and a temporary repricing of India's stability premium, InCred said

Markets could witness a short-term correction of 5-7 per cent in the Nifty index if the National Democratic Alliance (NDA) loses power in Bihar, as investors price in a "coalition discount," according to a note by InCred Equities.

 

The brokerage said that should the NDA lose Bihar, triggering a ripple effect that leads to an INDIA bloc-led coalition government under leaders such as Nitish Kumar or Chandrababu Naidu, markets are likely to experience a brief risk-off phase driven by political uncertainty.

 

However, it should be noted that most exit polls predicted a comfortable win for the ruling NDA in the state polls. The Exit Polls also predicted that Chief Minister Nitish Kumar-led Janata Dal United (JDU) could improve its tally this time.

 

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A modest 3-6 per cent swing among Extremely Backward Classes (EBC) and youth voters across about 100 marginal seats could cost the NDA up to 60 seats, threatening its long-held electoral strongholds, the brokerage said. "A potential alliance between Chandrababu Naidu, Nitish Kumar, and Eknath Shinde could emerge as a pragmatic centrist front, uniting regional forces against the BJP and reshaping the national coalition landscape."  ALSO READ | Bihar Exit Polls, US-India deal: Reasons for Sensex, Nifty rally today

 

“In past instances where dominant-party stability gave way to coalition ambiguity, such as after the 2024 election results, when the Nifty 50 fell 6 per cent in a single day, investors have quickly priced in concerns over policy continuity, fiscal prudence, and reform momentum,” InCred Equities said.

 

The report expects near-term volatility across indices, potential foreign investor outflows, and a temporary repricing of India’s “stability premium.” However, it added that the medium-term trajectory would depend more on credibility than composition.

 

“If the new coalition sustains infrastructure spending, preserves macroeconomic stability, and avoids populist drift, markets can stabilise and even recover as policy clarity emerges,” it noted.  CATCH BIHAR ELECTION 2025 RESULTS LIVE

 

On the sectoral front, the brokerage expects defence, infrastructure, and PSU (public sector undertaking) themes to lose momentum, while consumption, regional, and SME-linked equities could benefit from a more decentralised fiscal approach. Bond yields may rise modestly, reflecting a higher fiscal-risk premium, while the rupee could remain under mild pressure until policy direction becomes clearer.

 

InCred Equities added that short-term volatility could present a cyclical accumulation opportunity for disciplined investors, as markets historically rebound once governance visibility returns. “In essence, a post-NDA coalition may unsettle sentiment in the short run, but the long-term trajectory will depend less on who governs and more on how decisively the new leadership sustains reforms and fiscal credibility,” the brokerage concluded.