The election euphoria swept the markets yesterday as Bharatiya Janata Party clinched victory in three of the five states. The S&P BSE Sensex sprinted 1,595 points intra-day while the Nifty climbed over 400 points. The BJP strode ahead of the Samajwadi Party in Uttar Pradesh while the Aam Aadmi Party cornered a landslide win in Punjab. The BJP also reigned in Uttarakhand, Manipur and Goa, the other three states for which elections were held last month. Though the election results were for assembly polls, this assumed significance as these are seen as a pointer to general elections, which are two years away. “State polls are touted as semi-final, before 2024 general elections have some impact on the direction of economic reforms and visibility of Modi-led government beyond 2024. Given that it included UP and a state from the Northeast, makes it very important,” says Amnish Aggarwal, Head of Research, Prabhudas Lilladher Pvt Ltd. The mandate, analysts say, is a good omen for investors from a medium-term perspective as majority states have shown their overwhelming acceptance to work done by the ruling party. Another interesting sub-trend is the emergence of a new creditable alternative to the existing parties on the national stage with pro-populist policies around management efficiency. Both philosophies, analysts say, will lead to focus on efficient governance, which is a good long-term indicator for investments in India. Devarsh Vakil of HDFC Securities, meanwhile, says the election euphoria may not last for long as potential macro shocks weigh on sentiment. The market’s fag-end trade yesterday confirmed Vakil’s fears.

The benchmark indices failed to hold on to their gains as global cues remained fluid. The BSE Sensex slipped nearly 800 points from the day’s high to end at 55,464. The Nifty50, too, cooled off around 160 points from intra-day high to end at 16,595. Given the global headwinds including simmering Russia-Ukraine tension and swinging commodity prices, analysts suggest investors exercise caution. Aishvarya Dadheech of Ambit Asset Management says, “Investors need to be vigilant because the uncertainty of geopolitical standoff still looms large. Commodity prices are least likely to see a secular downturn even after war subsides because sanctions will continue to disrupt the global supply chain. Unless sanctions are withdrawn, the global markets can remain volatile in the coming months and India will not remain insulated.” On Friday, global cues, including commodity prices, Ukraine war, European Central Bank’s interest rate decision and inflation and jobs data for the US will continue to sway indices.

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