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Nirmal Bang Report
Our base case continues to be a stable government which should provide relief to markets. However, support for the BJP from coalition partners will be imperative. Given the tenuous nature of coalition politics, we would adopt a cautious stance with a preference towards Large Cap Defensives given the heightened volatility.
The incoming verdict suggests that some re-balancing of expenditure towards the ‘bottom of the pyramid' and support for employment, income and consumption beyond the formal sector may be inevitable.
As we had highlighted in our Appraisal of Manifestos, irrespective of the composition of the majority or political party, we do not expect change in the broad direction of economic policy and consequently expect the infrastructure and manufacturing push to sustain, albeit with some re-balancing towards consumption themes.
The verdict suggest that aggressive fiscal consolidation may take a backseat and the fiscal deficit may be maintained at ~5.1% of GDP in FY25 even after accounting for the higher RBI dividend. However, we do not expect any significant deterioration in macro fundamentals.
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