Nifty may soar on indication of clear Modi 3.0 in exit poll

·         All focus may be now on the exact poll as alternative Social media continues to predict a hung Parliament in sharp contrast to the Sarkari media

India’s benchmark stock index, Nifty closed around 22530.70 Friday, edged down +0.19% after snapping 5 days of losing streaks on hopes & hypes of Modi 3.0 with a blockbuster/comfortable majority, ensuring the continuity of Modinomics ahead of the last phase of polling and exit poll Saturday evening (1st June). Overall, Nifty slips around -1.86% for the week ahead of election exit and exact poll on the concern of Indian political and policy uncertainty over the outcome of India’s general election.

Indian market is now dancing more to the tune of ‘Sarkari Godi’ media (Modi savvy), which is predicting a comfortable Modi 3.0 with 350+ seats (similar to 2019) or even blockbuster 370/400+ seats. This is in sharp contrast to Social media analysis/prediction consisting mainly of experienced journalists, political analysts, and even semi-psephologists actively surveying various big battleground swing states apart from having direct/indirect contacts with various political parties/local leaderships. Various social media analysts are now predicting around 200-225/250 seats of BJP/NDA; i.e. clearly hung Parliament with downside risk for the incumbent BJP.

A few days ago, India’s incumbent HM Shah claimed in an election rally that he ‘has the outcome of the election up to the 5th phase in his pocket’, which indicates ‘Modi-ji’ has already won 310 seats and is on the way to a blockbuster majority of 400+ seats (for NDA), while ‘Rahul-baba’ (Cong) will win not more than 40-seats.

But Nifty also undercut as there is significant uncertainty over the outcome of India’s election. Shah’s election bytes may be a simple election strategy to boost up BJP supporters ahead of the 7th and last phase of the election on 1st June to win the maximum possible number of seats for improving the overall tally.

As HM/PM of the country, Shah-Modi may have early access to not only exit polls being done by various private polling organizations but maybe also regular IB reports about election trends. But as an experienced political leader, Modi-shah is also trying their best to look/sound confident, even if the election wind may not be in favor of them.

In any way, as highly expected, on Saturday (1st June) evening, India’s Modi savvy (controlled) TV media projected around 310 seats for BJP in the 2025 election (vs 303 seats in the 2019 election) and 49 seats for pre-poll BJP allies; i.e. around 360 seats against 354/358 seats in 2019.

 

Almost all have similar exit poll numbers

Now after 7th phase of poling (1st July) in India’s marathon election, most of the social media political journalists/analysts/psephologists (in the ground) are still estimating around 217 seats for BJP and 27 for BJP allies, totaling 244 seats for NDA (with downside risk) against 120 seats for main opposition party Cong/INC and 152 seats for pre-poll Cong allies, totaling 272 seats for IND alliance (with upside risk). Even the IND alliance seems very confident about winning at least 295 seats this time despite a terrible exit poll for them.

AVERAGE EXIT POLL BY SARKARI AND SOCIAL MEDIA

Updated average exit poll by India’s Social media

 Previous opinion poll by Social Media

Thus all focus may be now on the actual result of the election on 4th June, even after Modi-savvy Godi media/polling organizations predicted a comfortable win for Modi with 300/350+ seats in their exit polls on 1st June, which would be in sharp contrast to the present social media narrative of Modi/BJP winning around 200/225 seats.

If BJP wins less than 250 seats, then Modi may be replaced by Gadkari as the next PM contender of NDA who has a moderate image and has good/cordial relations with almost every other political party across various states. If BJP indeed wins around 225-200 seats, BJP may need the support of additional regional parties that have not joined any alliance now officially. BJP may also need not only the support of its existing NDA allies but also some IND allies and in that scenario, Gadkari will be an ideal candidate rather than Modi due to the nature of vendetta politics and personal attacks by Modi.

 

Conclusions:

Nifty edged down 0.33% in May after gaining around +3% in the last 4 months (Jan-Apr’24). Overall, Nifty has been in a consolidation mood since Jan’24 after the start of India’s general election season. Nifty gained almost +3% YTM (2024); i.e. is consolidating with a positive bias around life lifetime high amid hopes & hypes of blockbuster Modi 3.0. But the overall Modi 3.0 optimism faded in the last few months since mid-Feb’24 after the exposure of the Electoral Bond (EB) scam, denting the so-called corruption-free image of BJP/Modi followed by various political narratives/controversial comments by both sides of the political spectrum.

The 2024 general election was looking ‘one-sided’ in favor of Modi even in Jan’24 (‘Aab ki baar 400 paar and Ayega to Modi-hi’). But that narrative has largely changed in the last few months and the election was looking like an exciting IPL (Indian Political League) T-20/T-50 or even a marathon series of seven (phases) test match series. Thus the Indian market was also consolidating in a narrow range; Nifty made a recent low around 21822 and then recovered to a new life time high around 23109.60 Monday (27th May 24) as most of the mainstream TV/Sarkari Godi Media was predicting a comfortable or even a blockbuster Modi 3.0, which is in sharp contrast to Social Media analysis of hung Parliament with a downside risk for BJP winning around 200 seats.

In any way, after the actual result on 4th June, we may see various political permutations & combinations involving various regional parties, and even pre-poll NDA and IND alliances. In politics, there are no permanent friends and foes, but Modi may have closed all alternative options for his extensive use of money, PMLA muscle, and personal attacks. Also, most of the BJP and RSS leaders do not prefer Modi as the next NDA PM due to his arrogant nature with totalitarian behavior and rapid ‘Congress Jukta BJP’ rather than ‘Congress Mukta Bharat’!

India’s election battle mainly centers around India’s complex caste, religion (Hindu-Muslim), and freebies (Robinhood politics) issues rather than core economic issues such as elevated unemployment and inflation (high cost of living). Although opposition political parties always try to corner the incumbent ruling party on unemployment and inflation issues, neither the opposition nor ruling parties have any concrete feasible plan to resolve the same.

Unlike in developed democracies (US/EU/UK/Germany), India does not have a formal/informal (official/unofficial) TV debate between 2-3 major political leaders over core economic/non-economic issues and any concrete plan to resolve those. There are no debates over issues of huge deficit spending (debt) and ways to fund it in the future. India needs to multiply its infra spending to improve the supply capacity of the economy so that it can match the growing demand of 1.5B people and a growing middle class.

In 2014, Modi came to power on development, Hindutva, anti-corruption and good governance platform. In 2019, Modi consolidated its position/power further on nationalism and global leadership appeal despite some anti-incumbent waves over core economic issues, demos and COVID. This time in 2024, after the built up of Ram Mandir in the disputed place in Ayodhya, there was no Hindutva wave. Also, there were no major nationalistic issues this time unlike 2019 (Balakot-POK surgical strike). The main issues were core economic this time like elevated unemployment/under-employment and inflation (higher cost of living) along with widespread political corruption to some extent for most of the voters.

But even then most of the voters may have the opinion that Modi is the most suitable PM to solve these issues, although over the last few years, ‘Brand Modi’ has been in clear decline amid decreasing popularity (at least by around 20%) and increasing ‘Modi fatigue’. Modi may have given over 80 ‘scripted’ interviews in the last 30-45 days (another world record) in a desperate attempt to improve his flagging image, especially after 2nd phase of polling amid various controversies (political narrative) over democracy/autocracy, freedom of speech, freedom after speech, modification of India’s constitution, one nation one election and even Muslims/Mangalsutra/Machlee/mutton/Mujra and even Ambani-Adani controversy.

Overall, it still seems that India may be going for a hung Parliament this time with downside risk for BJP getting even below 200 seats rather than blockbuster/weak Modi 3.0 with a comfortable majority of even 350/350+ seats. There may be various political permutations & combinations to form the next alliance government led by either INC/Cong or BJP after the actual election outcome/result (exact poll) on 4th June. The Indian market is still discounting a comfortable Modi 3.0, hovering around record high levels and set to scale another life time high around 23550-23750 by early Monday amid a positive exit poll for Modi 3.0 and hopes of continuation of Modinomics.

No doubt Modi is a great political leader with an autocratic nature and strong personality (like former PM Indira Gandhi), and also a great administrator. Modi has delivered various social welfare schemes of the UPA era much more effectively to the intended poorer section of society (dole money politics) along with ‘Brand Modi’ (old wine in a new bottle). For this, a large section of women and OBC voters become blind supporters of Modi over the last few years, despite decreasing support from the Muslim community, now almost 20% of the Indian population.

The favorable social engineering also helped Modi to a great extent along with political permutation & combination (favorable political mahagotbandhan/grand alliance) in various states to win hook or cook. Also, Modi’s popularity is still undisputed despite a recent dip and most of the general public/voters have faith in him, even though they may not like BJP local leader/MP/MLA; Modi's magic is still there. Against Modi’s ‘godfather’ image, political maturity, and personality, the main opposition leader Rahul Gandhi is still far behind despite significant improvement in the last few months. Modi has been in power for over 22 years as Gujrat CM and India PM; still is always in election mode without any public vacation, while Rahul Gandhi is still struggling with Cong infighting often triggered by Modi & Co.

Nifty EPS (consolidated) may grow around +23% in FY24 and +15% on an average in FY: 25-30

India’s real GDP has grown over 8% in the last three years (post-COVID) against almost 9% on average in pre-COVID years. Nifty is now growing around 15% on average in the last two years (post-COVID); has grown around 6% in FY23 and 23% in FY24. Looking ahead, assuming 6-10% of Indian real GDP growth on an average for FY: 25-30, the Nifty EPS should also grow by around 15-20% CAGR (from the present trend rate of 10-15%). Nifty earnings growth may be boosted by possible RBI/Fed rate cuts (lower borrowing costs), another stable government led by PM Modi/BJP (political/policy stability), huge thrust on infra spending, possible GST rate cuts/recalibration, lower oil prices, adequate pricing power by producers, increasing government spending and also private capex coupled with higher USDINR, positive for export heavy Nifty earnings.

At the present run rate, Nifty EPS (consolidated) may grow by around +23% in FY24 to INR 1053 against FY23 EPS of around 858 amid higher USDINR (positive for export-heavy Nifty earnings), robust performance by banks & financials (higher bond yield/RBI repo rate positive for higher NIM/NII), and vibrant domestic demand.

Now looking ahead Nifty may report a TTM EPS (FY24) of around 1053 in Q4FY24, assuming an average sequential growth rate of around 5-6%, in line with the present trend. Thus at 20 averages PE, the fair value of Nifty may be around 17160-21060 for FY: 23-24. Further, assuming an average growth/CAGR of around +15% (against projected real GDP growth of around 8-10%), Nifty EPS may be around 1211-1393; and Nifty fair value may be around 24219-27852 by FY: 25-26. As the financial market usually discounts EPS (earnings) at least one year ahead, Nifty may scale 23700-24200 by Dec’24/Mar’25 and Dec’25/Mar’26.

Overall exit poll by India’s mainstream TV/Godi media’s prediction of a clear Modi 3.0 with 350+ seats (NDA) is in line with the initial opinion poll survey, but above market expectations to some extent if we consider the prediction by alternative social media of 225+ seats for NDA and the choppiness of the market in the last few weeks. On Friday night (US session), India 50 (CFD of Nifty) closed around 22750 amid positive global cues (progress of Gaza war ceasefire and softer US core PCE inflation). Also, India’s better than expected real GDP data for FY24 and Q4FY24 boosted the Nifty/India's 50 future.

Market impact: Indian election result (exact poll)

Now after better than better-than-expected exit poll for a clear Modi 3.0, Nifty 50/India 50 CFD may further jump to around 23550-23750 levels (around +5%) in the opening session on Monday (3rd June). But we may soon see long unwinding/fresh shorts from that record-high level ahead of the exact poll 4th of June. If the exact poll (4th June) reflects the exit poll (1st June) then we may see a further rally around 5% to 24700-25000 Nifty levels and then some correction (as FPIs are still heavily short, everything equal).

If India goes for a hung Parliament this time, then Nifty may slump by 10-20% on/after 4th June. The market will recover after the formation of the next government either under the Cong or BJP in hopes of continuity and no sudden change of key policies as in reality, even the Cong should have a long-term vision for any policy change rather than any knee-jerk reaction. There may be some incremental changes in key policies over the longer term. Eventually, global/local markets/economy and corporations are controlling politics and economics, and politicians and corporations adjust each other for a middle way in such a situation. On the other side, if the exact poll on 4th June shows a weak Modi 3.0, then also the market may stumble.

Even if BJP/Modi fails to form the next government and Nifty slumps 20%, it will be a wonderful opportunity to invest in blue chips at cheap/discounted valuation as IND/Cong policy may be at par with NDA/Modi or even better (if we compare previous performances); on the other side, if Modi/BJP/NDA indeed wins a comfortable majority this time with 300/350+ seats, then Nifty may jump another 5% to around 24700-25000 levels rather than 10-20% to 27500-28000 levels as market is already discounted to a great extent amid DIIs (Indian PPT) support.

In that scenario, it may be also a wonderful opportunity to book windfall gain at a steep valuation and to enter again at lower/reasonable levels after some weeks/months. Unlike 2014 and 2019, this 2024 election is full of uncertainty and nothing is impossible in politics/actual election outcome.

India’s current growth story is too much ‘Modi’ dependent (one man story), and there is a perpetual risk after his absence/retirement. But BJP is also a cadre-based professional political party along with various credible faces (like Gadkari) for the next leader (after Modi). Even under a Cong-led (IND) government, the Indian growth story may remain unaffected as records show no major differences in economic performances between UPA (2004-14) and NDA (2014-24). Thus any sharp correction even after the election (in the scenario of a hung Parliament) may be a wonderful opportunity to buy the Indian growth story at a deep discount as valuation is supported by solid earnings growth irrespective of any political narrative.

Technical trading levels: Nifty Future

Whatever the narrative, technically Nifty Future (23015) now has to sustain over 23300 for any further rally to 23400/23525-23650*/23850*-24075 and even 25000-26000 levels in the coming days/weeks (if Modi indeed comes to power again with a comfortable majority of 300/350 or even 400+); otherwise sustaining below 23250/23150-23050/22850*, Nifty Future may fall again to 22600/22450-22350/22150 and 22000/21800*-21600*/21500 and further to 21175/21000*-20400/20000* and even 19700/19400-19200/18800 and even 18500*/17500-17300/15650 in the coming days (at least initially, under hung Parliament like scenario; if BJP/NDA indeed gets around 200 seats or INC/IND set to form the next government).