As Karnataka polls near, investors are keenly watching the trend for the 2019 elections: Will the Narendra Modi's BJP win the crucial state, or will it be Congress under the leadership of Rahul Gandhi?
As Karnataka polls near, investors are keenly watching the trend: Will the Narendra Modi’s BJP win the crucial state ahead of 2019 Lok Sabha election, or will it be Congress under the leadership of Rahul Gandhi? The optimism was high after BJP’s win in North East states, but it has since become challenging.
While the market sees NDA (National Democratic Alliance) staying in the lead in 2019, the street is also concerned about Modi falling short of an absolute majority, DBS said. “Markets are coming around the view that the 2019 general elections might see the ruling coalition, National Democratic Alliance (NDA), stay in the lead but fall short of an absolute majority in the lower house,” DBS said in a research note this week.
Karnataka polls are being watched closely by investors as the main opposition party at the Centre — the Congress — holds an absolute majority in the state and is likely to face stiff competition from the BJP. However, if the BJP wins this election, it could lead to higher optimism in the market than at present. Apart from a lacklustre performance in two bypolls by the BJP, efforts to form a united front by the opposition and region parties could also pose a big challenge for Narendra Modi.
Meanwhile, the government is facing rising political and economic headwinds in the run-up to the general elections. “…any adverse developments, especially on growth slowdown risks or escalation in global risk factors (higher oil, rebound in US rates/USD etc), might necessitate pre-emptive and supportive policy actions,” DBS said in the note. “On its part, the government is likely to go-slow on further reform rollout, instead focusing on fine-tuning implementation to minimise further negative economic shocks,” it added.
Earlier, Wall Street brokerage Morgan Stanley, too, had said that the biggest concern for investors could be a weak coalition government after 2019 election. The report also said that it is unlikely for investors to be as optimistic as the 2014 election, which saw Narendra Modi coming to power with a thumping majority.