Market of Maharashtra is waiting for the election result

Dated 15th October, 2014

The outcome of the assembly elections in Maharashtra and Haryana will act as the next big trigger for the markets as the BJP tries to get a solid, solo footing in both the states.

A victory in Maharashtra, home of the country's financial capital, would help Centre push economic reforms. And, if the BJP comes to power in the state then they are seen being more able to take bolder decisions, say analysts.

"Battle in Maharashtra will be crucial as it is a four-cornered contest. Maharashtra being an industrial state contributing around 13 per cent to India's industrial output and a major hub for FDI investments, stock markets are expected to react to the election outcome," says Kiran Kumar Kavikondala, Director & CEO, WealthRays Securities.

"Decisions related to goods and services taxes which face strong opposition from some states would ease out and some boost could be seen. Issues concerned with reduction in price control in diesel could be seen gaining more attention," he added.

Maharashtra assembly election is as important as Lok Sabha election due to the size and the number of constituencies in the state.

Voting began on Wednesday on the 288 assembly seats of Maharashtra where 8.35 crore voters are eligible of exercising their franchise. Of the 288 constituencies, including 36 constituencies in Mumbai, 234 are general, 29 reserved for scheduled castes and 25 for scheduled tribes.

"The winner could use the Maharashtra as a strong platform for next Lok Sabha election," says Tushar Pendharkar, Equity Strategist, Right Horizons Financial Services.

"Therefore, I believe that any deviation from expected results could impact the market due to overreaction of investors on the situation," he added.

Maharashtra has immense potential for infrastructure development and FDI for manufacturing, which is the main theme of newly elected Modi government. So, a win here will a crucial in expediting reforms, say analysts.

Therefore, BJP would not be able to afford the loss in Maharashtra assembly elections, adds Pendharkar.

Voting has begun in Maharashtra and Haryana for Assembly elections in both the states, and results will be announced on Sunday, Oct 19.

A win for BJP will strengthen the party in Rajya Sabha which will help in passing major bills, say analysts. Important reforms like GST where manufacturing states like Maharashtra fears revenue losses may get boost as market participants expect big bang reforms from BJP.

Kavikondala is of the view that a decisive mandate in Maharashtra, where battle is four-cornered, will favour stock markets as it will strengthen the view that coalition government politics is nearing its end in India.

Based on expectations from new government, stock market may react positively to BJP victory; however, a fractured mandate will create difficulties in rolling out important bills like GST, labour reforms in the state and may impact stock market negatively.