The Bharatiya Janata Party's (BJP) resounding win in the key northern state of Uttar Pradesh is expected to boost the sentiment in equity and bond markets, brokerages said.
There will be a decrease in overt populism running up to the 2019 elections, which could result in a further crackdown against tax evasion, a report by brokerage Axis Capital said.
A victory of this magnitude indicates demonetisation has done little to dent the Prime Minister's popularity, it said. The victory will embolden him to continue with reforms, brokerage Edelweiss Securities Ltd. said. It remained overweight on information technology and metals.
Also Read: Modi's Big Uttar Pradesh Win Positions Him For Second Term
The results add to positive medium-term view on the rupee, which is also supported by India's strong balance of payments position, forex reserves and domestically driven economic growth, Nomura said in a report.
The state poll outcome does do not materially change the medium-term picture on bond markets, but should result in value-buying in bonds with short-term maturities (3-5 years), both from local and foreign participants, Nomura said.
Gains made in these elections will not make legislating reforms any easier as the BJP is well short of the halfway mark in the Rajya Sabha, Nomura said. BJP has managed to pass reforms despite its lack of an outright majority in the upper house by building consensus and this will have to continue, it said.
Also Read: Dalal Street To Cheer BJP Uttar Pradesh Victory On Tuesday
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