The Indian market woke up to strong cues from both global and domestic factors which took benchmark indices to record highs in opening trade. The Sensex rallied over 200 points to hit a record high of 32,621.42 while Nifty50 rose to a fresh life high of 10,098.35 in first 60-minutes of trade.
The US Federal Reserve left interest rates unchanged in its 2-day policy meet which concluded overnight and back home there was positive news on the political front.
Nitish Kumar, Bihar Chief Minister resigned on Wednesday, dumping its ally, RJD, over corruption charges against his deputy Tejashwi Yadav. Hours after the news was announced, BJP announced its support to Kumar to form the government—a positive for investors and markets.
Bihar was a key state for the BJP if they want to make a comeback in 2019 elections and now by forming the government with Nitish Kumar removed any roadblock for the Modi-government, helping investor sentiment.
“From investor sentiment perspective it is a very positive development. Wednesday’s episode makes clear, any doubt if there was on BJP’s road to 2019. I think the market is pretty much discounting that,” Jimeet Modi, CEO, SAMCO Securities told Moneycontrol.
“Nitish Kumar was perceived to be one of the possible heads of either a third coalition or a grand coalition that could exist along with Congress. Now, with that breaking away, the opposition looks less competitive,” he said.
In the 243-member Bihar Assembly, JD(U) has 71 MLAs and the BJP 53. The two parties together have 124 MLAs, marginally ahead of the half-way mark. Besides, they have the support of NDA allies LJP (02) and RLSP (02), said a report.
If you are an investor foreign or domestic, such a developments on the political front do auger well for equity markets because of markets like stability. A stable political regime can give immense support to equities even at the time of adversity.
Nitish Kumar who was sworn in as chief minter of Bihar on Thursday is now a six-time Chief Minister and the second time in past two years. Some are terming it Nitish Kumar's "ghar wapsi" into the NDA-fold.
JD(U)'s return to the NDA fold marks a significant shift in the fortunes of the Opposition parties. With Bihar, the Opposition was hoping for a strong Grand Alliance for 2019. Now, with this Gathbandhan, BJP will lead 18 states in India, strengthening its position for the 2019 elections, said a report.
Strength in Rajya Sabha is another reason why this Grand Alliance is positive for markets and reform push. Strength in Rajya Sabha will help the Modi-led government to push through crucial reforms with ease.
“If you remember BJP’s biggest loss after coming to power was Bihar and Delhi. Now with Nitish coming back to NDA’s fold will give the ruling party much-needed stability as well as strength in Rajya Sabha,” A.K.Prabhakar, Head -Research at IDBI Capital told Moneycontrol.
“The government is working on 2019 election as well and to come back to power they might have to take few more states into their stride. In the south, BJP has a very little presence and with Bihar coming in provides political stability,” he said.
Prabhakar further added that the probability of BJP coming to power has increased as the alliance has weakened the opposition unity. It is positive for markets and investors who are looking to invest for 5-6 years.
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