The Indian stock markets are today expected to reflect the results of exit polls from the second phase of Gujarat state elections by the afternoon, even as television channels have to wait till the end of voting to show the results.

Several channels, including Times Now, ABP and CNN News18 have tied up with pollsters to announce results. But they have to wait for the polling to get over at around 6 PM to show the results.

However, bigger investors in the stock markets are expected to get wind of exit poll trends well before that.

Investors tend to be nervous about any indication that the current, reform-oriented government at the center is losing popular support. Changes in market levels in the second half of trading could serve as an indirect indicator for the results of the exit polls.

Stock markets are expected to go up if the early trends indicate a strong performance for the BJP, or show ‘nervousness’ if results show a neck-and-neck fight or an edge for the Congress Party.

The Narendra Modi-led is generally considered a more pro-markets dispensation as it is more likely to implement sometimes hard-to-swallow reforms, such as cracking down on tax evasion.

The government has, in the last one year, introduced two far-reaching reforms — a surprise demonetization that forced everyone to declare their cash assets, and the Goods and Services Tax that replaced a multitude of central and state taxes with a single, uniform levy across India.

Gujarat, a state where a large part of the population is engaged in trading, is seen as a litmus test for the government as the two reforms have caused considerable hardships to small businessmen and traders — the core constituency of the BJP.

For this reason, it is expected that the BJP has suffered a decline in popularity in the state over the last several months. Secondly, the party has been in power in the state for two decades, setting up a potential anti-incumbency wave against it.

Despite this, investors have not been able to ascertain if the loss of support due to GST and anti-incumbency is substantial enough to result in a defeat for the BJP in Gujarat.

Opinion polls have so far given a narrow lead for the saffron brigade, but such polls have traditionally underestimated change and have shown a conservative bias in India.

In other words, opinion polls have traditionally failed to capture unexpected and radical changes in voting patterns — such as a big swing towards the opposition. This has variously been blamed at pollsters ‘playing safe’ by sticking to what is expected and to the reticence of change-seekers to state their true intentions in front of pollsters.

Exit polls, though not totally immune to the conservative bias, have been slightly more accurate as they are conducted on the day of polling.

A total of 182 seats in the Gujarat Assembly are up for grabs, out of which 89 went to polls on Saturday and 93 are going to the polls today. The markets did not exhibit much nervousness on Monday, the first day of trading after the first phase of election.

On Friday, the Nifty 50 closed had closed at 10,269. It opened with a positive gap at 10,308 on Monday and ended the day at about 10,326, registering a gain of 0.5% for the entire day.

Today, the Nifty index opened at 10,229.30, higher by about 36 points compared to Wednesday’s close. It is trading at 10,183 at 1052 IST. The live trends can be seen here.

The official results of the Gujarat election will be announced only on Monday, Dec 18, when the counting will take place.

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