Broking firm Phillip Capital said it saw “good execution” and “very positive feedback” on central government policies announced by Modi government over the last four years in Madhya Pradesh and Rajasthan, and said a close fight — regardless of the outcome — would not have a significant impact on the stock markets.
“We keep hearing of the various policies of the Modi government,” said Anjali Verma, Chief Economist at the firm, explaining the rationale behind the decision to do a ‘ground check’. “So we thought it was time to go on the ground and get some perspective as to what has been the implementation.. if at all, people are gaining from them.”
The firm’s analysts traveled extensively through both rural and urban areas of Rajasthan and Madhya Pradesh — two BJP-ruled states that are set to announce election results on Tuesday. Many investment and advisory firms undertake such ‘ground checks’ to get an idea of which way the wind is blowing ahead of elections that have the potential to impact stock markets.
Such trips serve as a reality check in a world where perceptions are created largely by city-based journalists and political pundits. In 2014, for example, the Congress-led UPA came back to power on the back of strong support from rural and agricultural voters, even as most analysts and pundits had written it off.
The current government, led by Narendra Modi, announced quite a few programs, such as Make In India, Skill India, Ujjwala LPG scheme and an accelerated electrification drive, in an effort to improve living conditions across the country.
As such, even as the government is seen by analysts as having failed to deliver on many of its key macro-economic promises such as ‘bringing back black money’, the rural impact of the programs and schemes remains an unknown.
“We received a very good feedback from most of the policies that the central government has announced over the last four years. We traveled in rural regions as well as urban cities of these two states and we got a very positive feedback on most of the central government policies,” Verma said.
“Execution is very good and we saw the social upliftment that has happened because of the policies that the government has introduced over the last four or five years. From that point of view, there is a very strong and positive economic as well as political impact of the central government policies.”
Verma said she did not see a long-term or significant impact on stock markets if the fight in these states turn out to be a close one, even if BJP loses in both.
“It will impact stock markets, but wouldn’t consider it a significant event,” she said.”If the BJP loses the couple of important states, the impact would be adverse in the near term.
“However, we wouldn’t believe that that’s the only factor that is going to drive market movement going ahead… I don’t think it’s going to have a long-lasting impact on the market,” she said.
A clear view of the impact, she said, could be taken only after analyzing the voting trends and the factors that led to the outcome.
“If the outcome is of a close fight, with a similar distribution of seats between the BJP and the Congress, one will have to see the margins with which the government is formed, which are the candidates who won, what were the caste equations etc.”