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NEW DELHI: The turf war is on, with the first phase of Assembly poll in Chhattisgarh kicking off on Monday.
From here on, uncertainties for stock investors are only going to go up as other key states Madhya Pradesh, Rajasthan, Mizoram and Telangana line up to keep their date with voters.
Chhattisgarh, Rajasthan and Madhya Pradesh have been traditional BJP strongholds, with a large agrarian electorate.
According to Nomura India, the results will be considered as a litmus test for the incumbent BJP’s ability to command the narrative in the 2019 general elections.
Brokerage Kotak Securities said a 3-0 score for the BJP (Chhattisgarh, Madhya Pradesh and Rajasthan) may extend the current rally while a 0-3 (all the three states) or 1-2 (Madhya Pradesh and Rajasthan) loss for the BJP may spark a sharp correction in the market.
The third outcome, it says, would make the market take a dim view of the BJP’s prospects in 2019, given the importance of the three states in BJP’s 2014 win.
Opinion polls so far have painted a mixed picture for the BJP.
The findings suggest that the saffron party will manage to retain Madhya Pradesh on the back of improved roads, power supply and social welfare schemes, but may lose in Rajasthan on anti-incumbency (youth unemployment, farmer distress and tensions over caste-based identity politics).
Besides, the party may fail to emerge as a clear winner in Chhattisgarh.
On Monday, the fear gauge India VIX spiked 5.88 per cent to 18.81.
The index predicts volatility over the next 30 days.
"The market is looking at the upcoming state and general elections with bated breath," Arun Thukral, MD and CEO, Axis Securities, told ETMarkets.com as part of a survey.
Vivek Ranjan Misra, Head of Fundamental Research at Karvy Stock Broking, is clear that the outcome of the state elections will set the tone for expectations of 2019 parliamentary elections.
"As things unfold in the run-up to the general elections in terms of the alliances, the PM candidature and so on, that should create volatility in the market.
The final outcome, however, will be a make or break for the markets," Misra said.
“There are many investors who are sitting on a lot of cash.
They are just waiting for probably more correction because that is the general sentiment that until the next election maybe in April-May, we will not have a stable market and probably we will get better opportunities,” Samit Vartak of SageOne Investment told ETNow.
The voting is on for 18 assembly seats spread across eight Maoist-affected districts of Chhattisgarh while the rest of the 72 constituencies in the state will go to polls on November 20.
Nomura India calls for care in reading the assembly poll outcome.
It said state election results should not be extrapolated for the prediction of a general election as Madhya Pradesh and Chhattisgarh have, in the past, overwhelmingly voted for the BJP in Lok Sabha elections while voters in Rajasthan have been less consistent.
“While it remains more likely that two out of these three states will vote for the BJP in general elections regardless of their state election outcome, the state election results should at least signal the pulse of public opinion,” the brokerage said.
