India’s equity markets could face a significant downturn if the ruling Bharatiya Janata Party (BJP) does not secure victory in the upcoming national elections in 2024, warns Chris Wood, the global head of equity strategy at Jefferies LLC, Bloomberg reported on Monday.
Comparing the potential impact to the BJP’s unexpected loss in 2004, Wood stated that he anticipates a correction of 25 per cent or possibly more in the stock market if the BJP doesn’t retain power.
While acknowledging that certain government-initiated reforms, such as the output-linked incentive programs to attract global supply lines, are unlikely to be reversed, Wood emphasised that there would be a substantial correction. According to Bloomberg, he expressed confidence in the market’s resilience “The momentum is such that it will bounce back.”
In 2004, India’s stock markets experienced a sharp 20 per cent decline over two days following the BJP-led government’s surprising defeat in national elections. However, the markets partially recovered after a Congress party-led coalition government assured continuity of policies aimed at opening up the South Asian economy, calming both the nation and the financial markets.
Wood also highlighted India’s promising growth prospects, characterising it as the “best growth story in the world going forward,” particularly in the Asian region. He suggested that ongoing challenges in China have only reinforced this positive outlook for India.
(Inputs from Bloomberg)
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