Bihar poll result unlikely to hit market sentiment; passage of bills, reforms key

While the National Democratic Alliance’s (NDA’s) loss in the Bihar elections could provide some short-term hiccups for the market, in the long-term the focus would be on the passage of key bills and the government’s reform measures, analysts and market intermediaries said.

While the BSE Sensex ended marginally lower by 40 points on Friday (November 6), it hit a one-month low of 26,304 on Thursday (November 5) as investors went on a sellling spree, fearing that a possible BJP defeat in the Bihar assembly elections would put the Modi-led government on the defensive. This could then delay the passage of key bills such as GST, appointment of a

real esate regulator, and push back economic reforms.

“I don’t think investors are overly worried. There can be some immediate nervousness but investors have realised that every state election cannot be a verdict on the government,” said Rashesh Shah, founder, Edelweiss Group. “Investors are hoping that the government will focus on reforms and stick to the mandate, which is to push growth and create jobs.”

British financial services major Barclays, however, said Indian financial markets were cautious ahead of the poll results, and a result against the BJP should lead to market weakness. “We feel that today’s results could be a material sentiment dampener in Monday’s early trade as this might be perceived as an additional stumbling block to the central government’s reform agenda.”

Mahindra Group CMD Anand Mahindra said in a tweet: “What’s wonderful about this country is that election vote-counting still attracts a larger audience than Bollywood or a cricket match.”

Stating that the Modi government should now focus on its economic agenda, Biocon CMD Kiran Mazumdar Shaw said: “With Bihar elections behind us, Modi govt can now give undivided attention to the economic agenda... Hope the Opposition aligns with the government and the electorate,” she tweeted.

“I am sure the new government will dedicate itself to fulfilling the aspirations of the masses by leading Bihar to a new era of industrial development, economic growth and prosperity,” said Sumit Mazumder, president, industry chamber CII.

Most of the immediate nervousness is linked to key bills as the ruling coalition does not enjoy a majority in the Rajya Sabha. To pass the bills, the government needs the approval of both Houses of Parliament.