Karnataka elections: With record voter turnout in Karnataka, even as the stock market keeps a keen eye on the outcome, Vikas Khemani of Edelweiss Securities says that a likely BJP victory will be cheered by the market. “I think any indication that the same government will continue in 2019, the markets will like it. That is what seems to be happening in the last couple of days. Any hypothesis which supports a possibility that NDA government will return, the market will like that. Anything contrary to this and market will not like it and will correct,” Vikas Khemani, President and CEO, Edelweiss Securities told in an interview to ET Now.
Taking stock of the current sentiment, Vikas Khemani said that a negative surprise in this regard is unlikely. “Currently we are moving in a direction that we may not see a negative surprise and you will be more or less ok with this,” he said. Interestingly, a recent UBS report too said that investors are pricing a Modi win in 2019, as the base case, and Karnataka state election outcome will act a near-term sentiment indicator. Khemani pointed out that a material change in the direction of stock market is unlikely.
“I don’t think we will see any material change in the markets, unless BJP is completely wiped out from the state, which is unlikely to happen. Given that it’s the election year, the stock markets will react to rhetorics, however, this government is unlikely to materially deviate from the path of fiscal discipline. The stock market will have to overlook those rhetorics,” he said.
A recent UBS report noted, “We met with more than 50 investors in the US/EU over the past month. Our meetings indicated many investors have priced in a “Modi win in 2019” as the base case.” According to the firm, most investors expect India’s economic growth to gather momentum in FY19, albeit with widening macro stability risks (inflation, current account deficit and fiscal deficit).
CLSA’s Chris Wood warned recently that if the current Prime Minister Narendra Modi is not re-elected in 2019, India’s growth would take a beating. In his Greed and Fear report, Chris Wood, equity strategist at CLSA said, “The Indian story would, in GREED & fear’s view, be badly damaged if the formidable Narendra Modi was not re-elected. India remains the best long-term story in Asian equities out of all the Asian markets covered by CLSA.”