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Global brokerage firm Macquarie has warned that post next year’s general elections, a coalition of several smaller parties, may increase the risk of political instability and would be perceived negatively by markets.
In a report dated September 27th, it says given the current political and economic upheaval, a new govt with a clear majority and a fresh mandate would be welcomed by markets.
Macquairie says after the twin surprises from the Fed and the RBI, the market has been consolidating as it awaits quarterly results. Consensus view is of a wash out quarter and expectations are extremely low – the perfect setting for some positive surprises, the report says.
The brokerage says the election fever is picking up in India and the upcoming elections in the four key states of Delhi, Rajasthan, MP and Chhattisgarh are being seen as a semi-final before general elections due next year. Opinion polls are pointing to BJP, led by Narendra Modi, to be the favourite. The four states that go in for elections in November account for 72 or 13% of the all India Parliamentary seats.
The recent opinion polls suggest that while BJP may continue to hold its position in MP and Chhattisgarh, Congress’ position in Rajasthan appears to be dwindling while Delhi could go either way.
The report says past election data shows that minor swings in votes can bring about large changes in seat share. Available data shows that Congress in MP and BJP in Delhi will require a relatively large swing of 3% to get past the incumbent’s seat tally and the vote swing required for BJP in Rajasthan and Congress in Chhattisgarh to pull ahead in seat tally is relatively small at 1.5%.
Elaborating on the political scenario, the brokerage says as the four states' assembly elections are scheduled closest to Parliamentary Elections, it is generally believed to follow a similar voting pattern. Barring the 1998 assembly elections followed by the 1999 parliamentary elections, where results were divergent in Delhi, Rajasthan and MP, the last two elections have followed a similar pattern.
A good show by BJP might bring in regional parties sitting on the sidelines. The media is already abuzz with the possibility of Chandra Babu Naidu joining NDA as its Convenor. Jayalalitha of AIADMK too has shown tacit support in Tamil Nadu. However, new friends have to be found in Bihar, Jharkhand, UP, etc.
Modi gets maximum hit on web
Macquarie says Gujarat Chief Minister and BJP’s Prime Minister candidate, Narendra Modi, has received the maximum number of searches on Google in a day with over 1 billion people searching the key word "Narendra Modi". This record had been held by Barack Obama during his presidential campaign.
