The Markets Cheer BJP win in 3 States in 2023

After winning all 7 Delhi seats, BJP confident of Assembly poll victory - India Today


The recent state election victories in Madhya Pradesh, Rajasthan and Chhattisgarh for India’s ruling Bharatiya Janata Party (BJP) have buoyed investor optimism over continuity of business-friendly policies. I unpack the implications across industries and for retail investors.

Analysis Explained for Investors:

The BSE Sensex and NSE Nifty 50 indexes tracking India’s largest public companies by market capitalization reacted positively to the BJP securing wins in 3 out of 4 key state elections. Analysts believe this signals regime stability in 2024 national elections, predicting a “Santa Claus rally” through year-end.

Original Analysis:

The state election results exceed expectations that the BJP would win but unlikely sweep all regions. This signals Prime Minister Narendra Modi retains popularity across India’s diverse population despite mixed economic performance. Continued policy inertia and inertia now appears more likely, bringing certainty to investors. In the short term, optimism may drive an end of year rally in equities, though fundamentals and global dynamics remain crucial over the longer term.

Impact on Retail Investors:

For retail investors, the election results provide clarity on India’s political direction in 2024. This could renew interest in Indian equities as longer term bets. However, retail investors should remain cautious of short term euphoria driving unsustainable gains inconsistent with economic realities. Portfolios should be diversified and include assets uncorrelated to Indian equities. Investors should watch for post-election stock bubbles and global dynamics like US interest rates and recession risks rather than extrapolating regional election gains.

Impact on Industries:

Businesses focused domestically like banking, infrastructure, real estate and consumer goods likely benefit from continued policy continuity and stability. Export-oriented sectors like IT and pharmaceuticals face global headwinds like the US slowdown and Eurozone energy crisis, muting gains from the election tailwind. Market-driven sectors like financial services and healthcare should see investor interest on business optimism while old economy sectors like manufacturing remain sluggish.

Long Term Benefits and Negatives:

The election results give certainty that Modi’s industry-friendly reforms in banking, tax, infrastructure and welfare are likely to continue over 2024-29 if re-elected. This policy and demographic tailwind could sustain over 7% GDP growth in the long run. However, delays in land and labor reforms, weak exports amid global slowdown and a strained financial sector saddled with bad loans could hamper the optimism.

Short Term Benefits and Negatives:

Markets are clearly signaling the election results as a positive surprise in the short term, overriding weak fundamentals at least momentarily. If the “Santa Claus rally” materializes through December, retail and institutional investors across the board could benefit. However, this euphoria may dissipate quickly in 2023 if the global slowdown and strong dollar strain Indian exports and worsen macrostability risks in an election year.

Companies to Gain:

Major conglomerates like Reliance Industries, Tata Consultancy Services, ICICI Bank and Hindustan Unilever are key benchmarks which could sustain strong market capitalization on continuity Tailwinds. Core sector leaders across infrastructure, materials and industrials like Larsen & Toubro, UltraTech Cement and Bajaj Auto also benefit.

Companies Potentially Challenged:

Export-driven technology majors like Infosys, HCL Technologies and Wipro face strong dollar headwinds which could mute gains. Old economy laggards in metals, telecom and real estate sectors saddled with debt may continue to underperform even as market optimism improves risk appetite for their distressed assets.

Additional Insights:

With the next national elections due in 2024, expect populist policy announcements in 2023 Budget to retain political popularity. Equity markets could sustain gains but will remain sensitive global recession risks. Investors should avoid euphoria-driven speculation and stick to quality names across sectors.


The state election results bring optimism that business-friendly continuity will sustain over 2024-29 if PM Modi wins re-election. But equity gains may mute over 2023 amid global challenges even as India’s growth outlook remains strong long term for patient investors.

Baliga, Ambareesh. “Equity markets likely to extend gains on BJP’s Assembly poll wins.” Business Standard,

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