Mint Explainer: As elections near, markets continue to bet on Modi. Why?
economic activity. GFCF as a percentage of GDP stood at 28.9% in FY22 and at 29.2% in FY23 and is set to rise further, after declining from a high of 35.8% in FY08 through 29.5% in FY19. However, it's not all smooth sailing.
A sluggish rural recovery post-pandemic and erratic monsoons might play spoiler. Unemployment also towers as a significant electoral issue, eclipsing concerns about poverty, price rise, and corruption, according to a recent Lokniti-CSDS poll. About 29% of those polled consider unemployment as the biggest election issue this time around against 11% in 2019.
And 22% of those polled think poverty is the next biggest issue while only 19% cited food price inflation as a worry. Despite these challenges, Prime Minister Narendra Modi's popularity appears to be unwavering, with 43% of those polled believing he is the apt choice for PM, down from just 44% in the 2019, according to Lokniti-CSDS poll. Brokerage IIFL Securities has cited the India Today - Mood of the Nation survey which has suggested a sweeping NDA win with 306 seats in its favor.
Morgan Stanley has forecast a 10% pre-election rally in India's benchmark equity index Sensex, contingent upon no early elections. Post-election market reactions could range from a 5% boost to a 5-7% dip based on NDA's performance. For instance, if the NDA wins less than 240 seats , the Sensex could correct by 5-7% in the near term as “the market could be concerned about the compromises that need to be made on economic policy to make a coalition government work," notes Morgan Stanley.
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