BJP victory may boost bank, industrial, power, property sectors: Jefferies

The 3-1 verdict between BJP and Congress in the state assembly elections set the stage for the road to the national polls in 2024

The BJP sweep in three state elections in the Hindi heartland is expected to augur well for domestic cyclical sectors like banks, industrials, power, property and midcaps, believes global brokerage Jefferies.

The 3-1 verdict between the BJP and the Congress in four states that declared results on December 3 has set the mood for the general elections next year. With the addition of Rajasthan and Chhattisgarh to the BJP's double-engine league of governments, including Madhya Pradesh, Uttar Pradesh, Uttarakhand, Gujarat, Maharashtra, Assam, Tripura and Manipur, the whiff of a continuation of the current regime at the Centre has turned stronger. The win in Chhattisgarh was hugely unanticipated, while in Telangana, the party raised its tally despite the Congress wining the state.

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The BJP's win in the three states is much better than what exit polls had suggested. “The result reinforces consensus expectations of a Modi win in the 2024 national poll. Competitive populism from both the BJP and Congress is also clearly visible,” said analysts at Jefferies.

Better-than-expected outcome for the BJP also reinforces the hope of policy continuity at the Centre beyond the 2024 elections. While the government has announced a few populist measures like cut in LPG cylinder prices, extension of the free food grain programme for five years, and lined up some more in the run-up to the May elections, BofA Securities doesn't see it impacting fiscal consolidation.

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“Better-than-expected tax revenues may offer additional resources, allowing the fiscal deficit to stay on course to achieve the targeted 5.9 percent of GDP in FY24,” said the BofA Securities analysts.

Brokerage CLSA expects both central and state governments to combat agflation (inflation in farm sector) through price controls or subsidies.

"After the state election outcome and surprisingly strong GDP numbers, it is clear that there is no alternative to India in terms of political stability and economic growth. Now these two factors have created a canvas for a pre-election rally,” said Sunil Nyati, managing director of Swastika Investmart Ltd.

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According to Nyati, there is a good chance that the Nifty may hit the auspicious 21,000 mark in December itself, while another 1,000–2,000-point rally can't be ruled out in the run-up to the general elections.

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