Making poll predictions are hazardous.
India has completed six out of the nine phases of the current elections. Considering the diversity in voters’ composition across genders, income groups, cultural background, geographies etc, judging electoral the outcomes in India is an impossible task. One can only visualize scenarios, of which three broad ones emerge.
Scenario One: NDA will form a government on its own, crossing the 272 mark with ease and the opposition parties give up the fight. For this to happen, NDA will need a strong showing in UP, Bihar and Maharashtra, and also spring surprises in Tamil Nadu, Andhra and Orissa. Such a decisive mandate will boost business certainty, spur investors’ confidence and, as a consequence, revive economic activity. NDA is known to be business friendly and are also aware that the current despondency prevailing in the securities markets is on account of the lack of governance in the past five years. A hostile tax environment adds to an unfavourable business climate, and NDA is aware of this and will be expected to deliver on reforms. Thus, pent-up demand and the ‘stability dividend’ will provide fresh impetus to capital expenditure and boost the stock market levels. This will also revive recruitment and training in capital markets and related areas.
Scenario Two: NDA will form a government, albeit with assistance from difficult-to-please allies. This will also cheer the markets, although with a pinch of salt, since he BJP will have less leeway, in order to accommodate populist schemes. No major reforms can be expected under such a scenario. A limited market revival can be expected, and some recruitment could resume in capital market- related jobs.
Scenario Three: NDA fails to muster up the numbers required and sits in the opposition. The NDA’s weak spot is along the Kerala-West Bengal axis. It could deliver a fractured mandate, and elections could be round the corner once again after two years. This doomsday scenario suits the fence- sitters the most. It will force India back by a decade, as investors, both domestic as well as overseas, will shun India as an investment destination. The prevailing uncertainty will do little to revive the secondary and primary markets and will thus be a damper on recruitment and training.
Of the three scenarios, Scenario One and Two are equally likely (40% each), whereas Scenario Three has a lower probability (20%) as per political experts. The underlying factors are: 1. NDA filling in the space vacated by Congress, AAP, SP, JD(U). 2. Leadership vacuum in the non-NDA parties 3. Ability of NDA to stitch up pre-poll and post-poll allies as no regional parties would like to back the fading Congress formation.
If the secondary markets revive, it could at first, benefit brokerage firms who deploy analysts. It would also spur mutual fund subscriptions (enhancing jobs among distributors, advisors and analysts). Investment Bankers could also see a pick-up in the primary (IPO) market for stocks and corporate bonds. Banks will also resume lending and this may revive credit rating activities.
Prof. Korivi is a Dean, School for Securities Education (SSE) & School for Securities Information & Research (SSIR)
MA (Economics & Political Science) and PhD from the University of Mumbai. Ex- Faculty IIM Kohzikode, SP Jain, NMIMS etc.