Nifty jumped on hopes of 400 seats for PM Modi in 2024 election

Dalal Street is boosted by political & policy stability, the attraction of Modinomics and 6D (development, deregulation, demand, demography, digitalization, and democracy)

India’s benchmark stock index Nifty jumped almost +500 points Monday on hopes of another blockbuster win for PM Modi/BJP in the forthcoming 2024 general election after than expected report card in four key state elections held recently, which was seen as a semi-final before 2024 final. On Friday, the Indian market already got a boost and Nifty jumped almost +400 points by increasing the odds of BJP winning in key state assembly elections like RJ, MP, and even Chhattisgarh (CG), contrary to an earlier odd, putting BJP in losing mode.

On late Thursday, an average of exit polls showed the advantage of BJP (against INC) in MP (124 vs 102), and RJ (104 vs 85), while the advantage of INC (against BJP) in Chhattisgarh-CG (49 vs 38) and Telangana-TS-against BRS (62 vs 44), while in Meghalaya (ML), regional party ZPM may win against MNF (17 vs 14), INC may get 7 seats and BJP only 1 seat.

Thus overall, BJP was seen already at an advantage in MP and RJ two big and important states, while at a clear disadvantage in TS and ML; although INC had an advantage in TS and CG, the eventual result of CG may be very close to BJP. In this way, the BJP is gaining significantly in all important 4-big states (MP, RJ, TS, and CG) compared to the 2018 state elections (although Modi won/gained significantly in the 2019 general election). Thus overall state elections are also indicating another big win for PM Modi/BJP in the forthcoming 2024 general election. Subsequently, India’s Dalal Street was also boosted Friday on Modinomics optimism.

On Sunday, the actual state election result showed a blockbuster win for BJP in three key states, RJ, CG and only one state win for INC in TS; the result of ML will be announced Monday, in which neither BJP nor INC will be able to win, while regional party ZPM may win against MNF. Overall, BJP won the semifinal before the early 2024 general election convincingly and is on the way to winning the 2024 general (LS) election; the question is whether it will be 350+ or 400+, not 250. In 2019, BJP won 303 LS seats against INC’ 52 and TMC’ 22.

To win 350-400 LS seats from the present 303, BJP has to win more LS seats convincingly in WB and southern states in a big way. There are around 65 LS seats in all three states (RJ, MP, and CG) and BJP won 61 seats in the 2019 general election despite losing the 2018 state elections (in all these three states).In 2019, BJP won 303 seats in the 545 LS; the halfway mark: was 273 seats, while 365 seats are required for BJP for the 2/3^rd absolute majority alone. Now BJP has a 2/3^rd majority in LS through various allies under NDA ally. If BJP has to win a 2/3^rd majority in LS alone, then it has to win many more seats (than 2019) in WB, Odisha, MH, Bihar, TN, AP, and TS (Swing Seats).

But considering the relatively higher Muslim and OBC voters in most of these states, it’s very difficult for BJP/Modi to win in these states in a big way despite the anti-corruption, development, and nationalist stance.

As of now, the BJP is not able to capitalize on Modi's popularity in Southern States as INC and other regional parties are quite strong in terms of both money & muscle power to compete with the BJP. The market may be convinced that to growing popularity of BJP/Modi’s leadership, inclusive development, anti-corruption, and targeted social welfare model along with booth-level cadre-based party organization may pave the way for BJP to win an additional LS seats around 50 or even 100 in the 2024 general election for a convincing 2/3^rd LS as-well-as RS majority alone. But in states like WB, BJP has no significant booth-level party organization, at least in rural Bengal. The same is true for the BJP in other key swing states despite the Modi wave. Thus, despite immense public enthusiasm during PM Modi’s rally/roadshows in TS, BJP got only 8 seats and it may take more time & effort, the right strategy for BJP to win in these Muslim/OBC heavy swing states.

Despite the appeal of Modinomics, India’s Federal government (India) still pays around 45% of revenue as interest on public debt, while various state governments also pay around 35% of revenue as interest on their public debt on average. Various states are now adopting increasing allocation for social welfare (grants/subsidies/freebies/dole money) under various schemes to get votes from poorer sections of society, which is a big vote bank for any political party in India.

Over the years, both BJP, INC, and other regional parties have been competing with each other and increasing various social welfare amounts to win votes and power in states. This is a growing red flag for overall Indian fiscal discipline despite higher/growing GST/tax collections. India should allocate much higher funds/resources for free (Govt/PPP) quality education (in English medium including higher educations), quality healthcare (fully functional hospitals) coupled with unemployment benefits for millions of unemployed persons as universal social welfare policy rather than present policy ‘Revdi/freebies/dole politics’ for a certain section of the society to win votes.

India may follow the US/European/West/Chinese model of socialism or mixed socialism for inclusive growth of the society/country so that there will be a thrust on quality employment rather than the growing culture never-ending cycle of ‘Revdi/freebies/dole politics’ to win votes. In MP, BJP can win this time due to the last-minute ‘LADLEY’ scheme, providing Rs.1200/- to women, which may be increased to Rs.3000/- after the election, if BJP wins. There were similar schemes/offers in CG and RJ and also across many other states, being governed by BJP, INC, TMC and other regional parties. The increasing thrust of dole politics/direct cash transfer to a particular/poorer section of the society around 80M people by both state and Federal governments may be acting as a fiscal stimulus to some extent, but not helping the GDP of the country, while fiscal math is getting scary day-by-day.

Nifty scaled 20K on hopes of US pension fund flow in 2024

Last week, Nifty also got a boost on hopes of a US pension fund flow of around $3.6B (around Rs.300B) in 2024. Earlier, Nifty was almost flat on muted global cues amid lingering uncertainty about the Gaza war extended/permanent pause; Nifty was also under stress on RBI regulatory tightening on unsecured retail lending and RBI warning about exorbitant interest rates being charged by various MFI/NBFCs for priority sector lending, especially farm/agricultural loan to poor villagers, who has no alternative route for financing rather than private lenders.

But by mid-Tuesday (28^th November), Nifty surged from around 19800 to almost 19917 on hopes of US pension fund flow in the Indian market. There was also a report about increasing odds of a clear win by BJP in Rajasthan (RJ). India’s Dalal Street was also buoyed by positive cues from Wall Street amid unconfirmed reports of an extension of the Gaza war pause till at least Sunday (3^rd December) from the prior Thursday. Subsequently, Nifty scaled around 20104, before closing around 20096.60.

On Tuesday, there was a report that in 2024, India may receive a substantial fund of around $3.6B or around Rs.300B as a portfolio investment from the U.S. Pension Fund after its index switch. The U.S. Federal Retirement Thrift Investment Board has total assets of around $600B. The board has invested around $68 billion in the International Stock Index Investment Fund till Oct’23.

As per reports, the US federal government’s retirement fund has decided to change the benchmark equity index to expand international exposure. This move could lead to a churn of $28 billion across global stocks while India could see inflows of $3.6 billion (more than Rs.300B) from 2024. The Federal Retirement Thrift Investment Board, which is one of the major US pension funds, recently decided to switch from the MSCI EAFE index to MSCI ACWI ex-USA and ex-China.

In 2023, FPIs may invest more than Rs.1T in the Indian Equity market, which has now market capitalization worth around $4T, almost 100% of India’s reported (unofficial) nominal GDP (at current prices) by Dec’23-Mar’24. India now enjoys a scarcity premium among FPIs in the EM space (except China) due to the attraction of political/policy/currency/price/growth/financial stability coupled with Modinomics and 6D (development, deregulation, demand, demography, digitalization, and democracy). Also, most of the Indian blue chip companies have good business models, earnings growth, deleveraging balance sheets, and trusted/impeccable management.

But on Thursday, the Indian market was also undercut by fresh diplomatic tension after U.S. authorities accused direct/indirect Indian spy agency (RAW) involvement in attempting to assassinate a U.S. citizen of Indian origin and a known ‘Sikh Activist’ in New City. This is similar to the recent accusation of Canada against India, which under strong political leadership of PM Modi and NSA Chief Doval may have changed (unofficially) the previous defensive strategy (under UPA/Cong Govt). India is now not hesitating to eliminate proven/known terrorists, even hiding on foreign soil and actively planning terrorist action against India.

Under the nationalist policy of the Modi admin, India is now playing on the front foot rather than the back foot to avert an offensive on the country, thanks to superior strategy, tech/AI, and an efficient set of official/unofficial mercenaries. But India will never acknowledge it. Also, most of the powerful countries like the U.S., Russia, China, the U.K., and Israel have strong spy networks and regularly do external surgical operations to eliminate threats against their national interests. India is also following the same strategy and being a big powerful country/democracy, India is now not shying away and such a surgical strike on foreign soil may not affect FPI flows and the Indian market significantly.

Conclusions:

In a way, it has been proved time & time again, irrespective of state politics, incumbency wave issues, and state/regional political leaderships; Modi has no problem in general election because of his strong political leadership, everything being equal. BJP/Modi is set to win the 2024 general election with a very big margin; the question is whether it’s 300 or 350 seats in LS, not 250. The so-called united Opposition (I.N.D.I.A) is still unable to project an acceptable face of an opposition leader contending for the post of PM against Modi.

Although Rahul Gandhi of INC is the 2^nd most popular candidate for PM after Modi (60% vs 20%), having an all-Indian political organization, it seems that the opposition is divided to announcing Gandhi as a PM candidate. In any case, India also needs a credible opposition party/front at the Federal level to compete with the BJP, ensuring all the balance & checks in a democracy.

But even under the hypothetical situation of a 2/3^rd majority in both LS and RS, there may not be any significant policy change, although more states will be able to implement federal policies more coherently and there will be additional infra/social development in some states, having presently opposition political parties. At present, Modi admin/BJP has no issue with the passage of vital legislation in LS/RS as some so-called opposition parties like TMC (WB) usually help BJP directly/indirectly (through abstentions).

Currently, BJP/Modi admin is also not very keen to bring any controversial/big bang reform bill, which may pose heavy political costs despite huge economic benefits, which may improve the productivity of the economy, which is the ultimate. Almost 60% of the Indian population is still under BPL (below the poverty line) against 5% in China. India needs big bang reform for quality employment and the average income of the general public, which still stands around 22K/month, against the average household/essential expense of around 30K/month.

Market wrap:

On Monday, Nifty made a session high around 20702.25 and closed around 20686.80, surging over +400 points (+2.07%). Nifty has now rallied almost 1870 points from the recent low around 18837.85 made in October; i.e. up almost +10%. In the last 7-days, Nifty was boosted by HDFC Bank, ICICI Bank, Axis Bank, L&T, Bharti Airtel, ITC, SBIN, Kotak Bank, NTPC, Infy, Bajaj Finance, Ultratech Cement, M&M, RIL and Adani Enterprise. Overall, the Indian market was boosted by all the sectors, led by banks & financials, energy, infra, realty, metals, automobiles, FMCG, media, techs/IT, and pharma.

Technical trading levels: Nifty Future

Whatever may be the narrative, technically Nifty Future (20804) now has to sustain over 20900 for a further rally to 21000-21225*/21425-/21725/22000 levels in the coming days; otherwise sustaining below 20850, may fall to 20500/20250* and further to 20100-20050/20000-19950/19900, Nifty Future may again fall to 19700/19600-19500/19380 and 19300/19150-19050/18950 and 18830/18750-18625/18490-18275/18075 in the coming days (in case of an adverse event such as wider Middle East conflict, etc).

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