Markets focussed on Maharashtra Elections – Can the Nifty hold 23000 ahead of voting on November 20

The Maharashtra Election on November 20 is the big cue for the markets this week. After a rather subdued week with the Nifty hovering around the 23500 support levels, the question is can the markets hold ground or is there room for more downside. Most experts believe that the results of the Maharashtra Elections along with earnings outlook and FII flow trends will determine the direction of the markets going forward.

Maharashtra elections pivotal

Most market observers view Maharashtra elections as pivotal for Indian markets due to the state’s significance- both economically and politically. Mumbai is India’s financial hub with the major stock exchanges in the city along with many corporate headquarters. They believe political stability in the state will go a long way in establishing investor confidence and market sentiment.

Anshul Jain, Head of Research – Lakshmishree Investments said that, “Overall, Maharashtra elections are a critical factor for market participants, influencing both short-term market movements and long-term investment decisions.

Elections in Maharashtra are closely watched by investors as they provide insights into the broader political climate of India. A stable and business-friendly government can boost investor confidence, leading to a rally in the market. Conversely, political uncertainty or a change in leadership can lead to market volatility as investors reassess the potential for policy shifts and economic reforms.

The recent market trends highlight the sensitivity of markets to political events. For instance, the Indian stock market has experienced volatility ahead of the 2024 general elections. Market behaviour in such scenarios often includes cautious trading and increased volatility as investors await clearer political outcomes.

In the context of market technicals, the Nifty is seeing 23000 as a key support level, which is expected to hold. On the upside, the Index could test 24600, provided the political landscape remains stable and economic policies continue to support growth and investor confidence.”

Impact of election outcome on policies

Will the election results give markets the momentum to change direction? Contributing 15% to India’s GDP, Maharashtra is home to institutions like the RBI, BSE, and NSE.

According to Ajay Garg, Director and CEO, SMC Global Securities, “Maharashtra is both an economic powerhouse and a major political battleground. The election outcome could influence policy decisions and investor sentiment, particularly in sectors that are directly impacted by government actions. Political stability in the state influences investor confidence and market sentiment, particularly in sectors like real estate, banking, and infrastructure. A stable government can drive policies supporting industrial growth, FDI, and initiatives like Make in India. As a key industrial hub, Maharashtra’s election outcomes impact major sectors and often signal broader national trends, shaping market dynamics and policy predictability.”

Significance of a Mahayuti win for BJP and the markets

Maharashtra is considered to be a key state for the Mahayuti alliance and the ruling BJP government. Most political observers say that a win for Mahayuti in the state is crucial because the NDA has seen some reduction in the number of seats in the Lok Sabha, and specifically in Maharashtra.

Commenting on various scenarios, Shiv Kumar Goel, Director at Bonanza explained that “If Mahayuti wins the majority in the Maharashtra Vidhan Sabha, it will clearly establish them as the preferred party to rule the state. It will also re-establish that they have the popular mandate to rule the country. This victory, coming after their win in Haryana, will strengthen the NDA’s willpower, and they may take slightly tougher decisions at the Centre.

If Mahayuti wins in Maharashtra, it will also strengthen the Central Government, possibly speeding up reforms that have been moving at a slower pace. It will improve the morale of the central government. For Congress, losing Maharashtra would mean their second defeat after Haryana.

The important factor for Mahayuti is how many seats the BJP gets in Maharashtra, as this will affect their hold on the state and the central government. If Mahayuti wins in Maharashtra, it will further strengthen the NDA alliance at the Centre, as other alliance partners will view the BJP as a stronger party and will continue accordingly.”