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What do poll results say about India verdict on cash ban, GST

Dalal Street, it's going to be more about ballots from here on

The BJP’s election momentum continues to hold sway. It has retained all-important Gujarat with a clear majority and wrested power from the Congress in Himachal Pradesh. The saffron party had its share of challenges — was up against rural distress, near-term disruption due to demonetisation and GST and two decades of anti-incumbency in Gujarat.

That said, Gujarat’s contest turned out to be much closer than expected, with the BJP’s tally at the lower end of exit polls. While it performed well in urban centres (despite GST/ demonetisation impact), it lost ground in rural areas amidst high farm distress.

This is the message that the BJP/government should take as the election cycle picks up pace from here (eight states go to polls in 2018, general elections in May 2019). To that end, we may see a policy bias towards fiscal spend with rural focus.

While we see the economic/earnings cycle picking up, the election cycle is probably now upon us, and this will add to the swings in the market. It’s more ballots from here…

BJP retains Gujarat, wrests Himachal Pradesh

The BJP has retained power in all-important Gujarat and wrested power from the Congress in smaller Himachal Pradesh. In Gujarat, the party has won 99/182 and in Himachal Pradesh 44/68. The victory itself is largely on expected lines and is commendable given that the party faced several challenges — two decades of anti-incumbency, protests by Patels (traditionally BJP stronghold), lingering farm distress in rural areas and dissonance among trading community in urban areas amidst demonetisation/GST-related disruptions. This indicates that Prime Minister Narendra Modi continues to enjoy widespread popularity.

But, Gujarat contest turned out to be tighter than expected

Notably, the contest in Gujarat has turned out to be much tighter than was widely expected. While the BJP’s tally (down 16 seats versus 2012) has been at the lower end of all exit polls, Congress recorded healthy gains (up 19 seats versus 2012). Though BJP did well in urban centres (despite GST/demonetisation impact), it lost ground in rural areas reflecting the impact of Patel protests and lingering rural distress.

On the other hand, the Congress’ campaign was better organised this time around compared to previous elections elsewhere in the country.

Electoral cycle picks up in 2018; farm distress key message for BJP

The electoral cycle will gather pace in 2018 as eight states will head for polls between now and General Elections 2019. That and the closer-than-expected results raise the likelihood of: a) less conservative fiscal approach; b) greater emphasis on rural and agri-sectors; and c) markets becoming more sensitive to the election journey relative to economic and earnings trends, which we believe should be increasingly positive hereon. We are now on the road to elections.

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