'While any figure above 272 would provide the BJP with a stable platform for the next five years, a number below 303 would suggest the BJP has possibly peaked.'
Brokerages believe the markets could see a sharp selloff if the Bharatiya Janata Party fails to cross the halfway mark of 272 seats in the ongoing Lok Sabha elections, the results of which will be declared on Tuesday, June 4, 2024.
However, most brokerages expect Prime Minister Narendra D Modi-led BJP to cross the 300 seat mark, with the coalition National Democratic Alliance projected to win between 330 and 340 seats.
'If the BJP does not secure a majority, but the NDA forms a government under the leadership of Modi as PM, this might lead to a sharp selloff in equities,' PhillipCapital said in a note on Tuesday.
'Assuming a stable alliance for the next five years under Modi's leadership, we would recommend buying equities on a steep correction,' PhillipCapital added.
'We do not see any chance of a non-NDA government coming to power,' PhillipCapital predicted.
"The market is currently pricing in a comfortable BJP majority. There are two critical numbers we are monitoring. If the BJP secures more than 303 seats -- the number they won in 2019 -- it would indicate increasing national penetration for the party, likely accompanied by strong performance in the South and East," Mukul Kochhar, head of institutional equities at Investec India, told Business Standard.
"This would set the BJP up for a stable five-year term, allowing them to advance their economic agenda, and would be a modest positive trigger for the equity market," Kochhar added.
The second critical number, he said, "is the absolute majority figure of 272. While any figure above 272 would provide the BJP with a stable platform for the next five years, a number below 303 would suggest the BJP has possibly peaked," Kochhar stated.
"This might lead to introspection within the party, potentially hindering its economic agenda. Such an outcome could disappoint the market. An even bigger disappointment would be a coalition government with no single party holding a majority," he added.
"However, this scenario appears unlikely."
In a note last week, Bernstein outlined election scenarios and how the markets could react.
The foreign brokerage said that the NDA securing less than 270 seats could trigger 'heavy profit booking in the near term and low or negligible returns for markets in 2024.'
It said BJP winning more than 290 seats will lead to an 'immediate market rally followed by short-term profit booking'. This outcome will lead to high single-digit or low double-digit returns for the Nifty this year.
Experts believe the market at current levels is pricing in a win for the BJP.
The benchmark National Stock Exchange Nifty 50 has rallied 4.6 per cent from its March lows.
Meanwhile, the Nifty Midcap 100 and the Nifty Smallcap 100 indices have surged 15 per cent and 20 per cent from their respective 2024 lows in March.
The Nifty 50 last closed at 22,705. The index is up 4.5 per cent so far in calendar year 2024.
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Feature Presentation: Ashish Narsale/Rediff.com
