Stock market, Maharashtra elections 2024: Voting underway. Will the outcome influence share investors?

Maharashtra elections 2024: Voting in Maharashtra is underway since 7 am and would conclude at 6 pm today, with a close fight seen between the BJP-led Mahayuti alliance and the Maha Vikas Aghadi (MVA) is making investors worried. 

Analysts noted that the stock market has seen some decent correction of late and that even as Maharashtra election is important, its results may not be a make-or-break deal for the market. Utmost, they see a short-term volatility. Hopes that the H2 earnings would be better on higher government spending would be key to hold the market levels, analysts said.  

Vishnu Kant Upadhyay, AVP – Research and Advisory at Master Capital Services said the elections in Maharashtra are crucial and could affect the stock market because the state makes a substantial contribution to the nation’s GDP and that state elections are sometimes regarded as a gauge of the nation’s mood. 

But while the elections in Maharashtra are a significant event, the market performance is not solely determined by them, Upadhyay said.  Additional elements, including the state of the world economy, company profits, and investor sentiment, are also quite important, he insisted.

Ahead of Maharashtra elections, the BSE Sensex and the NSE Nifty on Wednesday saw late selling, as the two indices eventually settled with modest gains.

Profit booking was seen ahead of the upcoming Maharashtra state election, said Vinod Nair, Head of Research at Geojit Financial Services. He insisted the recent correction in market valuations suggest a potential pause in further price erosion. 

The recovery, he said, would depend on an uptick in earnings which is likely to rebound due to the likely spurt in central and state expenditure in H2.
    
At 77,578.38, the BSE Sensex is down 8,399.87 points, or 9.76 per cent, over its all-time high of 85,978.25 hit on September 27. Nifty at 23,518.50 is down 2,758.85 points, or 10.50 per cent, over its record high of 26,277.35.

As per media reports, Phalodi Satta Bazar is betting on BJP winning 87-90 seats. The BJP-led alliance Mahayuti is seen grabbing 144-152 seats, aligning with 145 seats that needed to retain power. 

The trends are hinting at a close fight and the election outcome can create volatility in the stock market, but the outcome itself should not be the key reason for investing decision, said Kranthi Bathini, Director of Equity Strategy at WealthMills Securities.

“If BJP and its allies are coming  to power, it is positive for the market. If not, it would be a neutral event for the market. The market is unlikely to overreact to the election outcome.”   

Nomura India felt that political parties in the fray are not just fighting their rival coalition parties, but are also seeking a reassert of their authority among partners in their own coalition. It said the ruling BJP-led coalition seems to have the edge following the announcement of populist measures in the run-up to state elections.

“Some commentators we met believe that the increasing popularity of freebies at the state level suggests BJP’s traditional aversion to them is on the decline, and there is a risk that some measures may be adopted by the central government in coming years, albeit this is not a given and needs to be monitored,” it said.

Emkay Global in a October 30 note said the Maharashtra election results should set the tone for national elections. This brokerage said that the election impact will not just be regional, winner from either side would have an upper hand in national politics and greater confidence going into 2029 general elections.

“A BJP-led alliance victory would signal policy continuity with emphasis on infrastructure and capex. A Congress-led alliance victory would drive a pivot to rural spending and a possible slowdown of some key infra projects. The fiscal discipline would be to watch out for, given the looming state debt on Maharashtra and two decades of financial indiscipline,” it said.

In case of a hung or close assembly, political realignment could be a potential outcome, if there is a hung assembly or the total seats of each alliance is similar, Emkay said earlier.