Low voter turnout not a worrying factor, say market experts

Antique Stock Broking, meanwhile, is of the view that the incumbent party may improve its 2019 tally but fall short of the opinion poll expectation of NDA winning 370-410 seats.

With heightened volatility in the stock market due to uncertainty over the election results, market participants said too much is being read into the voter turnout this time, which has been lower in percentage terms than in 2019.

They said there are no factors to indicate that the ruling party is not coming back to power and though the number of seats may fall short of pre-poll expectations, the Bharatiya Janata Party is largely expected to improve on its 2019 tally.

Various reports suggested that the comparatively low turnout this year would affect the outcome, with the BJP failing to reach its desired number of 370 Lok Sabha seats for the party and a total of 400 for the National Democratic Alliance.

Global financial major Nomura said the “thesis” that the lower turnout in a number of BJP strongholds is leading to a rethink in terms of a clean sweep for the party and, in turn, leading to a market correction, is “spurious.”

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It said the voter turnout at about 66.9 percent is only a tad lower than the multi-year high of 67.4 percent in 2019 and still higher than the historical average. Additionally, there is “no clear empirical signal from voter turnout, as low voter turnout in past elections has been associated with both incumbent victories and changes in power.”

Base case

However, Nomura said the uncertainty is likely to prevail until the exit polls (June 1) and the final results (June 4).

“Our base case assumes opinion polls are correct (i.e., the BJP retains power, securing a simple majority on its own). In our view, this result would likely calm investor nerves, ensure policy continuity and support macro financial stability,” states the report.

Global financial services major Investec Bank Plc said the “practical requirement” is the BJP reaching the majority mark – 272 – and forming a stable government.

“… anything over 303 seats (their score in 2019) will indicate that BJP is increasing penetration in the country,” it said in a recent report while highlighting that the betting markets indicate that the BJP will most likely win about 300 seats.

There is no denying that volatility in the Indian stock market has jumped in the past few months.

In most months of the current calendar year, the benchmark 30-share Sensex has gyrated in a range of 3,000-3,500 points, though it has been gaining steady ground. The Sensex gained over 1 percent in each of the months of February, March and April, although it is slightly in the red in the current month till date.

Antique Stock Broking is of the view that the incumbent party may improve its 2019 tally but fall short of the opinion poll expectations of the NDA winning 370-410 seats.

“A repeat of the 2004 trend of poor voter turnout resulting in loss of seats for the BJP is unwarranted as there is a significant expansion of its voter base (especially among lower income households) … analysis of voter turnout mapped against the winning margin suggest that BJP is better placed,” the domestic brokerage said.

It added that the first time optional postal ballot facility to voters aged 85+ and the disabled may lead to an upward revision in voter turnout and also, lopsided elections -- as seen recently in the Gujarat and Punjab assembly polls -- does typically lead to a drop in voter turnout.

A section of market experts highlighted that while voter turnout may have dipped as a percentage, in terms of absolute numbers, there has been an increase with the addition of about 60 million voters since 2019.

“Out of these, nearly 20 million are freshly registered voters in the 18-29 age group. While the percentage may see a minor decline, the absolute numbers will likely increase,” said Bernstein, a part of the Societe Generale Group, a France-based global financial services major.

“Even if we consider a 66 percent voter turnout, lesser than the average of all three phases seen so far, we still see the absolute number of voters jumping by 24.7 million. The absolute figures, as well as the percent figures, are hardly a significant divergence from 2019,” it said.

“… a 2-3 percent decline in voters along with anti-incumbency will likely lead to figures just below the 2014 tally. A large decline (>5 percent) without much anti-incumbency should see them repeating figures of 2019 with minor up/down revisions. Only the case of a large vote share decline (>5 percent) and significant anti-incumbency is where the elections become a market-defining event,” Bernstein said.

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