Bihar election verdict more of a stabiliser than catalyst for stock market, say experts 

Political stability may be a positive factor that has come out of the Bihar election mandate, but any expansion of the welfare state can hurt the economy in the longer run, one of the market experts said.

At first glance, the share market seems to be unenthused by the Bihar election outcome, even with NDA’s emphatic lead well-above the halfway mark, comfortably beating exit poll projections. Normally, state elections don’t move the equity markets meaningfully.

However, the outcome of Bihar state elections matter because of the NDA’s current composition at the Centre. Unlike previous election cycles, the BJP has reduced strength in the Lok Sabha, and the NDA is dependent on key regional allies such as the JD(U) and the TDP, making the arithmetic of political stability a crucial factor for governance. Any political surprise, especially from Bihar where the JD(U)’s presence is significant, could have raised questions around the cohesiveness within the alliance, experts have said.

Any sign of weakness in electoral performance would have prompted speculation about commitment of smaller allies, fears of policy delay, or chances of friction within the ruling coalition.

Following the exit polls, the street seemed to have priced in a comfortable victory for the NDA alliance, even though, as recent history has shown, exit polls did not always fully reflect the counting day outcomes. This time, however, the results were more in favour of the ruling coalitions.

The big question that now arises is can the results spark a post-poll rally, or fuel a move that could take markets to an all-time high of 26,277?

Veteran journalist Sanjeev Srivastava has argued that the verdict is more of a stabiliser than a catalyst.

“I was mentioning the other day… the reverse would have really caused mayhem in the markets if the NDA had lost. Now, it is more like status quo. The next big elections will be May next year - West Bengal, Tamil Nadu, etc So till then everything is stable,” said Sanjeev Srivastava.

“I think that markets will be more guided by what happens on the policy front, what happens on tariffs, what happens on earnings of companies… the usual stuff. Politics has just reaffirmed that the government is stable, there to stay, nothing unusual and near to short term,” said the veteran journalist.

The verdict, according to Sanjeev Srivastava, doesn’t change the market’s trajectory beyond removing an overhang.

For investors tracking the global landscape, the more interesting cue is the India-US engagement over the trade deal. Manishi Raychaudhuri, CEO of Emmer Capital Partners said the election outcome has cleared the hurdle for key policy decisions.

Speaking to CNBC-TV18, Manishi said, “It's clearly an underscore as far as policy stability is concerned… it gives the ruling party and the NDA some more wiggle room. There were important decisions not being made - especially around agriculture and dairy - pending Bihar elections. These are politically sensitive issues. Now, it opens avenues for those decisions to be finalised.”

Sectors such as agriculture, dairy, chemicals, manufacturing, autos and export-linked industries could see medium-term tailwinds, in the near future, he added.

Not everyone is looking at the Bihar election outcome as market friendly.

“It’s victory of hard and focussed work and freebies… not the best for markets as necessity to change goes down and more states will go down the path of populism,” cautioned Ajay Srivastava, Managing Director of Dimensions Corporate Finance Services.

Political stability may be a positive factor, but any expansion of the welfare state can hurt the economy in the longer run, he added. Auto, telecom, hospitals, gold loan companies, defence could be the sectors that will remain in focus, according to Ajay Srivastava.

In the near term, the verdict keeps the interest alive in sectors that typically gain from policy continuity. Retail, housing, infrastructure, media, healthcare and public services stand to benefit from a steady administrative environment in the state and uninterrupted capex momentum.

Among individual names, Aditya Vision, V2 Retail and Hindustan Media Ventures are exposed to Bihar’s consumption and advertising sentiment. SIS -headquartered in Patna and offering security and cash logistics services - has recently seen institutional and government-led demand and is confident of future growth.

Ashiana Housing, Refex Industries and Jeena Sikho Lifecare too have exposure to the state and are looking to ride the momentum of improved regional developmental activities.

Recent announcements of RailTel’s over Rs 7,000 crore digital order to Varun Beverages’ new Buxar facility and Globus Spirits’ expansion plans also highlight the growing confidence of corporates for investing in Bihar. Infrastructure-focused players like GR Infra, PNC Infratech, NCC, L&T and Ashoka Buildcon continue to benefit from the state’s large project pipeline and ongoing central connectivity initiatives.