Mumbai: The outcome of the Assembly polls in five states is unlikely to have a major impact on the equity markets as participants feel that the results will not lead to any major change in the composition of the Rajya Sabha, where the ruling BJP led National Democratic Alliance (NDA) lacks majority to pass key reform bills.
However, experts added that a victory for the BJP in Assam as predicted by various exit polls would be sentimentally positive for the markets as it comes after a series of dismal performance registered by BJP in state assembly polls (Delhi and Bihar) during the last 18 months.
Following the exit poll results, the equity markets rallied higher with the Sensex gaining 120.38 points or 0.47 per cent to close at 25,773.61 while the Nifty ended the session at 7890.75, up 30 points or 0.38 per cent.
According to the exit polls released on Monday, the BJP is likely to get majority in Assam while it is not likely to make any major impact in other four states (West Bengal, Tamil Nadu, Kerala and Puducherry).
These five states account for 51 seats in the Rajya Sabha. Assam, where BJP is expected to show good performance sends seven members to the upper house of the Parliament. However, the re-election to these seven seats would happen only in 2019.
“While these elections are not going to alter the numbers in the Rajya Sabha in favour of the BJP, it would definitely boost sentiments in the markets. With exit polls also predicting a second term for Mamata Banerjee led Trinamool Congress (TMC) with absolute majority in West Bengal, the markets are abuzz with speculation that TMC could cooperate with the government to pass key bills in the Rajya Sabha,” observed Ambareesh Baliga, senior research analyst.
While the underlying sentiments remain positive with limited downside risk, Mr Baliga noted that the monsoon would be the next major trigger for the markets. “If the monsoon turns out to be normal, it will be a huge positive for the markets,” he added.
