Even before the results of Bihar Assembly elections, a period of ups and downs has started in the stock market. There was a huge rise in Sensex and Nifty on Wednesday after exit polls indicated NDA’s victory. However, market experts estimate that if the results differ from the exit polls, there could be a huge fall of 5-7 percent. Brokerage firm InCred Research has said in its strategy report that if the NDA is voted out of power in Bihar and the opposition alliance forms the government, investors may sell their shares due to uncertainty. The brokerage firm has dubbed this the “alliance discount.” According to InCred report, the defeat of the BJP-JDU led NDA alliance may increase investors’ concerns regarding political stability. The report warns that in such a situation a decline of 5-7 percent may be seen in Sensex and Nifty.
However, the report also said that this decline could be short-lived, provided the new government attempts to maintain fiscal discipline and policy continuity. “In the medium and long term, what matters is not who is in power, but how committed the new government is to sustainability and improving fiscal discipline,” the report said.
‘Bihar elections’ have become a political barometer
The report said that if there is a change of power in Bihar, it can be considered a barometer of the national political environment. Both the NDA and the Grand Alliance (GGB) are projected to get around 40% vote share, which means the contest is extremely tough. The report estimates that a 3-6% shift among extremely backward class (EBC) and youth voters could change the results in more than 100 seats.
The equations have changed with the arrival of Jan Suraj
According to the report, Prashant Kishor’s party ‘Jan Suraj’ can get around 10% vote share in Bihar elections. This could harm the NDA’s traditional vote bank, which includes the upper castes and non-Yadav backward classes. “When the stability of a major party gives way to coalition uncertainty, investors quickly begin to question policy continuity, fiscal discipline and the pace of reforms,” the report said. This could create an environment of “instability and uncertainty” in the market, as was seen during the 2004 and 2024 Lok Sabha elections. After the 2024 Lok Sabha election results, Sensex and Nifty fell by a massive 6% in a single day.
Which areas can be affected by Bihar election results?
Increed says that the impact of Bihar election results will not be the same on all areas. Infrastructure, defense and PSU stocks may see pressure in the near term as these stocks are benefiting from government capex and policy support. However, consumption, regional and small and medium enterprise (SME) stocks tied to the local economy may outperform in a politically unstable environment.
