Indian Economy
Bernstein predicts decline in business sentiment, drastic impact on Infra if Congress-led INDIA bloc forms govt at Centre
New Delhi/IBNS: Bernstein Research, in its latest India Strategy report, said a tally of around 330-350 seats for the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government in the ongoing Lok Sabha elections could trigger a short-term rally in stock markets with the benchmark Nifty index breaching the 23,000-mark post-elections.
The Bernstein report, on the contrary, paints a gloomy picture for the Indian economy and markets if the ruling NDA government fails to gain a majority and return to power at the Centre.
The report listed possible scenarios of how the Lok Sabha election results could pan out for the economy and markets post-June 4, and states that a tally of less than 270 seats for the NDA could lead to drastic effects on infrastructure-building in the near term.
Bernstein Research said in its latest report titled ‘Modi 3.0 & Positioning into Election Results’, “Funds will be diverted out of infra projects towards social initiatives. The private sector will be pushed to participate in infra, which will lead to only the most viable projects emerging as others are shelved.”
A near-term decline in business sentiment as tax breaks and subsidies for the poor may be financed through more taxes on the corporate or the rich, the report predicts, adding that Foreign Direct Investment (FDI) too would fall in such a scenario.
The report further predicts heavy profit-booking in the near term with the possibility of low or no returns this year as a likely implication for markets in the event of the Congress-led INDIA bloc forming a government at the Centre.
However, the Bernstein report states that rural consumption will pick up with more money in the hands of the poor.
“UBI schemes, employment for 3 million, and tax breaks will aid PFCE growth. Quick recovery possible,” as per the report.
"Inflation could cross 6 percent with 10 kg free food distribution leading to depletion of stocks and an increase in MGNREGA wages leading to higher demand for other goods," the report added.
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