Share market: which political party should win the election?

The immediate trigger for the stock market is the January 28 policy meet, but the big event that investors are waiting for is general elections. The elections this time assume more importance than ever for an investor as in the last two general elections, the stock market saw gap moves. In 2009 and 2004; the market was up 18% and down 19%, respectively.

Bharatiya Janata Party, BJP

"If somehow the markets start to believe that the BJP might not form the government, then you would see a decent amount of selloff on the markets," says Prashastha Seth, IIFL Private Wealth.

BNP Paribas says a Narendra Modi-led administration is seen as having the potential to deliver better, more decisive governance, kick-starting structural reforms, re-accelerating FDI inflows at a national level and ultimately reinvigorate India's macroperformance over the medium term.

Global rating agency Moody's in a report this week said BJP's victory can offer better economic management and investment-friendly policies to investors.

"If elected, a Modi-led BJP government should offer a more business-friendly policy that will further support confidence and investment," said the report.

BJP's share of the national vote has declined in the last three elections and, in 2009, it only managed 116 seats with 21.4% of the popular vote.

Aam Aadmi Party, AAP

The emergence of Aam Aadmi Party, or AAP, has changed the status, and the possibility of a hung Parliament is something which is now being seriously weighed by experts.

"It is essentially unlikely that AAP will win elections and be part of a rolling coalition. I'm truly disappointed at the spectacle of a chief minister being a protester. A chief minister is a CEO, his job is to pick stuff, not stand outside and protest," says Ajay Shah, Senior Fellow, NIPFP.

"As of today yes (AAP leader Arvind Kejriwal is a nut case), he says in front of the television cameras that he is an anarchist. That is no way for a chief minister to be," he says.

Jim O'Neill, ex-chairman, Goldman Sachs AMC, says AAP appears to have made the election situation quite tricky.

"I would imagine that when you get closer to the general elections, they might not seem so attractive, as they have done in the local elections recently, but it is really an important event for India," he says.

Congress

"Congress-led UPA has served us for 10 years. We are disappointed by the underperformance of the UPA in delivery," says Ajay Shah.

"So, for example, the goods and services tax was there even before UPA-I started; but over 10 years, the UPA has failed to deliver on that," he adds.

On the positive, he says, "The project shelf has improved in UPA's time. They have given us UID Authority of India, they have given Delhi-Mumbai Industrial Corridor, they have given us the Indian Financial Code, and so on. So, there is a strong shelf. Our bottleneck now is in execution," he says.
  BNP Paribas says in a report that "rightly or wrongly, the Congress-led UPA government, which has been in power since 2004, is seen as largely responsible for India's macro-travails of recent years."

Neutral stand

"Irrespective of which government comes to power, things are going to be improved hereon. We are at an inflecion point for the economy after seeing worst," Sanjay Dutt, Director, Quantum Securities, told ET Now last week.

Experts are in fact seeing a rally of about 15% on benchmark indices irrespective of what government comes to power.

"Some of the macro issues are behind us and despite the fact that there is very little to show on growth front, our view is that returns will be better in the range of about 15%," Prabhat Awasthi, Head-Equity Research & MD, Nomura, told ET Now.

"That is not assuming any political upside or downside risks," he clarifies.

"Whatever the new government might do given the state of the economy, some of the healing that the economy has seen will probably stay in place," he adds.