Will markets crash if BJP loses Haryana, J&K, Maharashtra, Delhi state polls?

The outcome of the state polls, especially in Haryana and Maharashtra, analysts believe, are also important from 'farm politics' viewpoint, and how the government deal with the farmer's demands

A reduced majority, or even a loss for the Bharatiya Janata Party (BJP) in Haryana and Jammu & Kashmir (J&K) state elections is unlikely to ruffle the markets much, suggest analysts. 

As thing stand, the markets, they said, have much bigger things to worry about such as the developing geopolitical situation in West Asia and its impact on oil prices, outcome of the US presidential polls in November and the upcoming corporate results season back home. Monetary policy of the global central banks, too, will be keenly eyed.

 

That said, a complete washout of the BJP in all state polls – Haryana and J&K now, Maharashtra (polls likely in November) and Delhi (likely in February) could trigger a temporary knee-jerk reaction, they believe.

Markets, according to G Chokkalingam, founder and head of research at Equinomics Research, took cues from the outcome of Lok Sabha polls and to that extent, they are already discounting what may happen now in the state elections. 

“Except Maharashtra, all other states are small in terms of number of Lok Sabha seats; hence, the impact of election results of these states would have a minimal impact on the markets. At this stage, how crude oil prices behave due to the ongoing geopolitical situation in West Asia would be more relevant for movement of the domestic markets,” he said.

Meanwhile, exit polls predict Congress' return to power in the 90-member Assembly in Haryana after nearly a decade. However, J&K is likely to witness a hung house, exit polls suggest, with the National Conference-Congress alliance likely to emerge closer to the majority mark of 46.

“The markets have priced in the outcome of the state elections to a large extent. However, Maharashtra remains key. A loss there could trigger a negative reaction. Over the next few days, however, the markets have a lot of other things to worry about such as the geopolitical conflict in West Asia, outcome of the Reserve Bank of India’s (RBI’s) policy and then the corporate results season. All this could keep the markets volatile in the near-to-medium term,” suggests Ambareesh Baliga, an independent market analyst.

Farm politics & state elections

That said, the outcome of the state polls, especially in Haryana and Maharashtra, analysts believe, are also important from 'farm politics' viewpoint, and how the central and the state governments deal with the farmer's demands. 

With state elections in farm-intensive states like Haryana and Maharashtra, the government’s intervention, according to analysts at Nomura, is aimed at balancing the interests of food consumers and food producers. “Too low food prices are also a negative for farmers,” wrote Sonal Varma, chief economist for India and Asia ex-Japan at Nomura in a recent note co-authored with Aurodeep Nandi.

From a technical standpoint, the Sensex, analysts said, has a significant support near the 100-day moving average (DMA) level of 79,572 levels.

“With the overall bias and sentiment precariously placed, the Sensex would need a decisive move above the important 20-DMA level of 83,400 to gain momentum. The support for the week is seen at 79,800 levels for the Sensex and at 24,400 levels for the Nifty. These indexes face resistance 83,500 and 25,600 levels, respectively," said Vaishali Parekh, vice president for technical research, PL Capital - Prabhudas Lilladher.