In the run-up to India's 2024 general elections , opinion polls indicated a strong likelihood of the NDA , led by Prime Minister Narendra Modi, securing a third term with a significant majority. These polls underscored Modi's enduring popularity and suggested further seat gains for the BJP.
Markets are likely pricing in Scenario 1 as the most probable outcome, anticipating policy continuity, macroeconomic stability, and potential for further structural reforms. Any unexpected outcome could initially be perceived negatively, causing political instability and policy paralysis, impacting business sentiment and investor confidence. Such scenarios could lead to knee-jerk reactions in financial markets, with equity valuations potentially testing pre-NDA levels.
Despite potential short-term volatility, historical trends suggest that the significance of election results diminishes over the medium to long term as markets and businesses adapt to new policies. Hence, significant equity weaknesses could present buy-on-dip opportunities. In fixed income, medium- to long-duration bonds remain attractive, especially if bond yields spike post-election.