Analysts say the Bharatiya Janata Party (BJP) ‘s reduced majority or even potential losses in the upcoming state elections in Haryana and Jammu and Kashmir (J&K) are unlikely to have a major impact on the financial markets.
At present, market attention is focused on more pressing global issues, such as the evolving geopolitical situation in West Asia and its potential impact on oil prices, the outcome of the U.S. presidential elections in November, and the upcoming corporate earnings season in India. Additionally, the monetary policies of key global central banks are being closely monitored for their effect on international financial markets.
Limited Market Reaction to State Election Results
However, analysts caution that if the BJP faces significant losses in all upcoming state elections—Haryana and J&K, Maharashtra (expected in November) and Delhi (likely in February)—the markets could experience a short-term adverse reaction. G. Chokkalingam, founder and research head at Equinomics Research, pointed out that the markets have already factored in the results of the recent Lok Sabha elections, which diminishes the potential impact of state elections.
“Maharashtra is the only state with a significant number of Lok Sabha seats, so its election outcome could have a more noticeable impact. Other states like Haryana and J&K are smaller in terms of parliamentary influence, which limits their effect on the market. The bigger concern now is the fluctuation of crude oil prices driven by geopolitical tensions in West Asia,” said Chokkalingam.
Exit Poll Predictions for Haryana and J&K
Exit polls suggest a potential return to power for the Congress in Haryana, which has a 90-member Assembly, after nearly a decade. In contrast, J&K is projected to witness a hung assembly, with the National Conference-Congress alliance approaching the majority mark of 46 seats.
Independent market analyst Ambareesh Baliga noted, “The market has already priced in the state election outcomes to a large degree. However, Maharashtra remains critical. A significant loss for the BJP there could lead to a negative reaction in the markets. In the coming days, attention will shift to other key concerns, including the geopolitical conflict in West Asia, the Reserve Bank of India’s (RBI) policy decisions, and the corporate results season, which will likely keep market volatility high in the short to medium term.”
The Role of Farm Politics in State Elections
Given the predominance of farming in these states, the state election results in Haryana and Maharashtra hold additional significance from the perspective of agricultural policies. Analysts believe the central and state governments’ handling of farmer demands will be closely watched.
Nomura analysts suggest that government intervention in these farm-driven states aims to balance the interests of food producers (farmers) and consumers. “Meager food prices can also hurt farmers,” explained Sonal Varma, chief economist for India and Asia (excluding Japan) at Nomura, in a report co-authored with Aurodeep Nandi.
Key Technical Levels for the Sensex
From a technical standpoint, analysts are monitoring key support and resistance levels for the Sensex. According to Vaishali Parekh, vice president for technical research at PL Capital (Prabhudas Lilladher), the Sensex is approaching crucial support at its 100-day moving average (DMA) of 79,572.
“For the index to gain momentum, it must break above the key 20-DMA level of 83,400. Support levels for the week are projected at 79,800 for the Sensex and 24,400 for the Nifty. Resistance is expected at 83,500 for the Sensex and 25,600 for the Nifty,” Parekh noted.
In summary, while the state elections will be closely watched, broader global and economic factors will likely significantly impact market movements in the coming weeks.
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