The Assembly election results from five States are worse than anticipated for the ruling Bharatiya Janata Party (BJP) and its losses in the three States where it was in power will be perceived as a negative development for its re-election in the 2019 hustings, say analysts.
Japanese brokerage Nomura said these poll outcomes are, however, unlikely to have any large impact on Prime Minster Narendra Modi’s popularity as they were fought on local issues.
The BJP has not only lost all the three States where it was in power for the past 15 years — Madhya Pradesh, Chhattisgarh and Rajasthan — but also failed to make an impact in Telangana and Mizoram.
It said while the BJP’s loss in Rajasthan was largely anticipated, the massive landslide in Chhattisgarh and the likely loss in MP were not anticipated.
“The sizeable loss for the BJP in both these States will be perceived as a negative for the BJP’s re-election prospects in the general elections,” Nomura said in a report.
From BJP’s perspective, while anti-incumbency and voter fatigue have played a role in their drubbing, the three big States are agrarian and can, therefore, raise concerns about agrarian distress being a real voter issue. “The results will reinvigorate the opposition parties,” it added.
Care Ratings said the main issues of conjecture for the markets will be the impact of the State elections on the trend for the general elections.
After the exit polls gave leads to the Congress, the market had lost 2 per cent on Monday.
The agency, however, said notwithstanding the course of the elections results as well as the news of the resignation of RBI Governor Urjit Patel, there was minimal impact on the stock market by the end of the day, with the indices actually closing higher.
“The market does not appear to have taken the flow of events in a negative manner,” the Care report said.
Nomura said the state election results are not positive for the rupee, with the BJP suffering significant losses of seats across States.
“However, the limited market reaction, even as MP results oscillated, suggests that market expectations were already very low heading into the election and these results do not materially alter the expectations for next year’s general elections,” Nomura said.
It said the Congress party’s stellar performance in traditional BJP strongholds will potentially embolden the formation of a grand coalition of Congress-led disparate regional parties.
It does not, however, expect talks of a grand coalition to raise the political uncertainty going into the April-May hustings.