As the Bharatiya Janata Party (BJP) under the leadership of Prime Minister Narendra Modi clinched both Gujarat and Himachal Pradesh, investors’ sentiments were reflected on Sensex and Nifty on Monday as results were announced. BJP’s victory came as a big relief for investors and almost all the sectoral indices of NSE closed in green with Nifty PSU Bank, Nifty Pharma, Nifty Auto, Nifty Metal leading the charges.
But, with election results now out and clear now, investors focus is going to shift on the 2018-2019 Budget, which would be the last full Budget of the current government. Rashesh Shah, CEO of Edelweiss Group, in an interview with CNBC-TV18 said, “I think investors will heave a sigh of relief but I think the focus will go back on the upcoming Union Budget for 2018, but also on the macro global factors like for example oil price and the US interest rate hike.”
“I think the economy is on an uptick. The auto sales numbers for October-November have been very encouraging. Even the affordable housing initiative of the government is taking off. So I think the economy is on an uptick. Even government will, I think even in 2018 will garner a lot more resources out of divestments like they did in this year also,” he said.
Meanwhile, an Assocham report suggested as India enters into the poll-bound 2018, it is likely that ruling party’s reforms spree takes a pause for populist measures. The Budget is expected to give some space to SMEs and the GST. An important take away from the current political-economic environment is that the Goods and Services Tax is expected to be further streamlined and rates further rationalised on the lower side. “The GST had not gone well with the traders, the major political force for the political parties and the issue remained in focus during Gujarat elections. Besides, the SMEs would also get a boost, starting from the Budget proposals,” Assocham said.
Creating employment would be the biggest challenge for the BJP before the elections. It is likely that the entire focus will shift from corporate India to the rural population. Several initiatives like support to farmers, rural and agri infrastructure is likely to get more attention. In the election year, keeping inflation in check is also going to be a key concern for the government.