Nifty outlook bullish, ‘stars align’ for Indian equities after Bihar election results, says Motilal Oswal

Motilal Oswal Financial Services said the NDA’s sweeping victory in the Bihar assembly election is set to act as a fresh sentiment booster for Indian equities, reinforcing the broader environment for a sustained uptrend in the Nifty 50. The brokerage said that the emphatic mandate -- the NDA won 202 of 243 seats, securing 46.6 percent vote share -- strengthens expectations of policy continuity, governance stability and a growth-focused political climate, at a time when macro and earnings indicators are already turning favourable for the market.

Motilal Oswal’s commentary was released on Monday morning, ahead of the market open, and comes in the backdrop of Friday’s sharply volatile session, when the indices swung repeatedly before a late rebound. By mid-session on Monday, the Nifty 50 was trading at 25,966.95, up 56.9 points (0.22 percent), extending the recovery.

Stars aligning for Indian equities: Political stability, earnings momentum

Motilal Oswal said the Bihar result adds to the “stars aligning” for equities, citing factors such as ongoing reforms from the RBI and government, improving demand conditions from GST 2.0-driven consumption support, easing interest rates, and a more constructive corporate earnings backdrop. The brokerage highlighted that Indian equities have underperformed emerging-market peers for over a year -- the Nifty has fallen 1 percent since September 2024, even as MSCI EM gained 20 percent -- and that the combination of political stability and better earnings momentum could help narrow that gap.

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On earnings, Motilal Oswal said the recently concluded Q2 FY26 season came in better than expected, with its universe registering 3 percent profit beat and 2 percent revenue beat. Midcaps posted an 8 percent earnings surprise, while largecaps were modestly ahead of estimates and smallcaps lagged. The brokerage sees this as an early sign of steadier earnings traction ahead, aided by improving demand, tax cuts for the middle class, and a more accommodative policy environment.

Policy execution boost for markets amid reasonable valuations

The firm noted that the Bihar mandate strengthens the “double-engine government” narrative, giving the Centre and the state greater alignment on policy execution -- something it believes markets tend to view positively. The verdict also signals a marked shift in Bihar’s voter preferences, away from caste-based politics and toward development-centred priorities, which the brokerage sees as encouraging for long-term economic prospects.

Motilal Oswal reiterated its constructive stance on Indian equities, citing reasonable valuations (the Nifty trading near 21.1x, slightly above long-period averages), a supportive macro setup, expected thaw in geopolitical tensions and the possibility of foreign portfolio outflows bottoming out after a sharp USD 27.7 billion selloff since September 2024.

While the Bihar win may give markets an immediate sentiment lift, the brokerage said investor focus will soon pivot back to upcoming macro triggers -- including the durability of GST 2.0-led consumption, further RBI commentary, global cues and corporate earnings progression.

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