BJP's clear win in Maharashtra may boost markets in near-term, but valuations a concern: Kotak Securities

Kotak Securities emphasised the focus should be on execution post BJP's win in Maharashtra elections

Indian markets are poised for a challenging period in the coming weeks, despite a potential near-term sentiment boost, analysts at Kotak Securities noted in their recent report. While BJP’s electoral success in Maharashtra and Haryana have solidified political stability and boosted investor confidence, broader market concerns persist. Elevated valuations and the likelihood of further earnings downgrades remain key risks for the markets.

The BJP-led alliance's impressive victory in Maharashtra, securing over 200 seats in the 288-member Assembly, signals continuity in the central government’s development agenda. Analysts expect limited fiscal consolidation, increased central government capital expenditure in the second half of FY25, and a sentiment-driven uplift in sectors such as infrastructure, urban development, and manufacturing, which are aligned with BJP policies.

However, Kotak Securities emphasised the focus should be on execution rather than new reforms or stimulus measures.

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Despite this political stability, concerns about economic fundamentals weigh heavily. Valuations in broader markets remain high, and analysts warned of potential earnings cuts due to growth challenges, rising inflation, and a weakening consumption profile. Disruption risks add to the uncertainty, dampening the optimism fueled by political developments.

The broader market slowdown is evident in the corporate earnings for the September quarter. According to ACE Equities, net profit growth for 694 listed companies stood at just 3.6 percent year-over-year, marking the slowest pace in 17 quarters. This contrasts sharply with the 15 percent growth in the June quarter and the 29 percent seen a year ago. Sluggish revenue growth, coupled with rising interest and depreciation costs, further pressured earnings.

The weak Q2 performance has already taken a toll on market sentiment, with Indian benchmarks falling nine percent from their all-time highs.

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