While the Q2 GDP growth rate at 7.6% surpassed all expectations, Street favourite BJP is seen winning the key Hindi belts of Rajasthan and Madhya Pradesh.
Historically, too, December has been dominated by bulls as in the last 12 years, Nifty has ended in the green on seven occasions.
Exit poll results
The exit polls of five states are leaning in favor of BJP for the key Hindi belts of Rajasthan and MP, while Chhattisgarh and Telangana are seen as a tight race to the top for the Congress.
“While this news adds more fuel to the market, the exit polls are not definitive, nor are state results a perfect proxy for national results. Nonetheless, a decisive BJP win will reinforce the consensus view that the party is on the front-foot for the 2024 general elections. This is likely to add another leg of rally to the markets, as policy continuity will be viewed as positive growth-shock in the medium term,” Emkay Global’s Madhavi Arora said.
However, investors must keep in mind that exit polls are not definitive, and the actual election results may vary. Other than that, state elections have had very little bearing on the general elections in the recent past. The run-up to the 2019 general elections had seen the BJP perform badly in these same states, and yet they still won by a resounding margin.
GDP data
India GDP growth rose to 7.6% in the July-September quarter, beating Street estimate of 6.8%, and maintaining its status as the fastest-growing major economy in the world. The growth was led by a stronger pickup in fixed investment and government consumption (on the demand side) and stronger manufacturing and construction output growth (on the supply side).
Following the release of the data, a slew of foreign brokerages like Morgan Stanley, Goldman Sachs, Citi and Nomura have raised FY24 GDP growth forecasts.
“Owing to the robust Q3, we are raising our FY24 GDP growth projection to 6.7% YoY from 5.9% previously. By contrast, we maintain our expectation of a moderation to 5.6% in FY25, due to a slowdown in public capex ahead of the election, continued sluggishness in rural demand and private capex, waning terms of trade tailwind, and our house view of a synchronised global growth slowdown,” said Sonal Varma of Nomura.
After 7.7% real growth in H1, economists are expecting that the full-year growth will be revised upwards once again, probably to 6.5-6.6%.
“Growth based on domestic demand also points to the fact that India’s economy will continue to grow in future despite the global economy slowing down. And hence, Indian economy will also continue to attract foreign capital inflows and will carve out for itself a different category among the emerging market (EM) peers,” said Apurva Sheth of SAMCO Securities.
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