Lok Sabha Election results 2024: What does lack of BJP majority mean for market, economy? Foreign brokerages weigh in

  • Nifty has delivered 9% and 8% returns in 3 and 6 months, respectively, post general elections since 1991, indicating that in the past a correction or dip has typically ended up as a buying opportunity over the longer term.

Ankit Gohel
Published5 Jun 2024, 12:16 PM IST
Nifty has given up its gains of the past month, during which it gained confidence in a BJP majority.
Nifty has given up its gains of the past month, during which it gained confidence in a BJP majority.(Photo: AP)

The Lok Sabha election results 2024 came as a negative surprise for the Indian stock market, with the frontline indices, Sensex and Nifty 50, crashing over 6% each on Tuesday, when the votes were being counted.

The Bharatiya Janata Party’s failure to secure an absolute majority in the lower house of the parliament, as predicted by several exit polls earlier, spooked investors on concerns over policy and reform continuity.

To assuage some fears, the BJP-led National Democratic Alliance (NDA) will still form the government with Prime Minister Narendra Modi continuing to remain in power, albeit with a slim majority.

However, analysts believe the NDA winning the third successive term is a big positive and continuity of power is a strong enough narrative to support the economy.

Read Lok Sabha Election Results 2024 LIVE Updates here

Morgan Stanley

Ridham Desai and other analysts at Morgan Stanley are of the view that the BJP-led NDA government is unlikely to sacrifice macro stability as its anchor to economic policy.

They do not expect the pace or direction of reforms to slow or change, rather they believe most of the likely reforms in the coming five years are in the arena of execution rather than law changes.

On stock markets, Morgan Stanley analysts said their medium to long-term views do not change. 

“Nifty has given up its gains of the past month, during which it gained confidence in a BJP majority. We expect realized and implied volatility to ebb in the coming days from its level on June 4, in our base case. Unresolvable disagreements within the NDA coalition are not priced in by the equity market,” Desai and his team wrote in a note.

Also Read: Will Modi 3.0 have to favour populism over bog bang reforms?


Foreign brokerage firm Nomura believes the election results could result in some reorientation of spending towards revex from capex, however it does not foresee a dismissal of macro prudence.

“We do not expect any slip of the interim budget target of 5.1% of GDP, but if the government deems reflationary policies as a political necessity, then that could mean slower consolidation. Supply-side reforms are likely to continue, while factor market reforms will remain difficult. We do not expect material impact on monetary policy,” Nomura said.

While near-term uncertainty is high and the political backdrop is slightly different, the broader direction of reforms, macros and the economy remain unchanged, according to Nomura.

Meanwhile, historical data shows the Nifty has delivered +9% and +8% returns in the 3 and 6 months post general elections since 1991, indicating that in the past a correction or dip has typically ended up as a buying opportunity over the longer term. 

Also Read: Election Results 2024: Here's what to expect from Indian stock market and what should be your trading strategy


Thus, following the sharp decline on June 4, JPMorgan expects continued choppiness over the next few days, with the large cap and defensive stocks like staples likely to remain in focus.

“Recent commentary from a few Consumer Staples companies suggests rural demand recovery is picking up and growth will come back in FY25. IMD forecasts an above-normal monsoon and raw material pressures are also abating, which are supportive to margins. Valuations appear reasonable for the sector, trading at 45x on a forward PE basis, near 5-year average levels,” JPMorgan said. 

It remains neutral on the consumer staples sector and prefers Hindustan Unilever, Dabur, Colgate Palmolive (India) and Nestle India shares. Its Nifty 50 Index year-end target remains 22,000.

Also Read: When mkt crashes, defensives like HUL, Nestle, Hero stand tall


Venugopal Garre and Nikhil Arela of Bernstein believe that continuity of power is a powerful enough narrative to support the economy. While some focus on subsidies at the expense of capex is expected, they do not see a material impact in the near term. 

“Given what we see - our previous stance on the market holds good. This is about decent economic growth but a peaking of earnings growth, less room for upward revisions and somewhat rich valuations. Hence, we retain our view of high single-digit returns, with the Nifty target unchanged at 23,500. We see volatility to remain a feature given uncertainty on policy path,” Bernstein analysts said in a note. 

Financials remain their key Overweight, but they have selective picks across sectors. They remain Underweight on Smallcap and Midcap stocks (SMIDs) over large caps. 

“From a very short-term perspective, we see the market sell-down as a bit extreme, leaving room for a modest rebound, with capex-linked stocks leading that,” Bernstein said.

Also Read: What major industries expect from the next government


Brokerage firm Citi said that the election results could possibly have multiple near-term market implications. Firstly, volatility and a likely increase in risk perception could impact multiples near term. On divestment, Citi believes investors will likely ascribe lower probabilities and await further clarity.

There is a possible tilt towards a bigger push on jobs and rural, which is good for rural plays. Citi believes infrastructure and capex remains a strategic priority for the government. In the energy sector, Citi sees a possibility of bringing gas under the purview of GST.

It would be selective on PSU stocks like NTPC, GAIL India etc., while it expects an increase in risk perception could put some pressure on SMIDs, which have outperformed.

Also Read: Emkay says market correction not deep enough, advises to stay away from PSUs, Capital Goods

Meanwhile, Indian stock markets moved into Lok Sabha election results with a lot of conviction which makes them vulnerable to a pullback given the less certain political outcome.


CLSA, which recently listed out 54 Modi stocks, said its exposure to these stocks is limited to ONGC and Reliance Industries as these have rerated by less than 15% in the last six months.

“We fear de-rating in the expensive discretionary and capex space and prefer the valuation support in private banks,” CLSA said. 

Also Read: With BJP likely to fall short of halfway mark, Shankar Sharma predicts LTCG, STCG tax to go down

CLSA tweaked its India portfolio to make it more defensive. The foreign brokerage has replaced Larsen & Toubro (L&T) with HCL Technologies in its India-focus portfolio.

Phillip Capital

Anjali Verma, analyst at Phillip Capital said that the not so favourable political outcome would be a risk to FII capital flows. Also, she remains vigilant on the response of domestic investors and liquidity in the equity markets – which has been the primary reason for its post-covid rise.

“Further erosion of the Indian market valuation premium is likely; thus, opine that valuations have still not turned attractive,” Verma said.

Meanwhile, more clarity on the detailed aspects of the government formation should emerge in the next few days to weeks and until then, analysts expect market volatility to persist.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.

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First Published:5 Jun 2024, 12:16 PM IST
HomeMarketsStock MarketsLok Sabha Election results 2024: What does lack of BJP majority mean for market, economy? Foreign brokerages weigh in

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