Nifty slid as 350+ Modi exit poll turned 240 in exact poll

·         India goes for a hung Parliament and even Modi 3.0 may be weak due to probable political and policy uncertainty in the absence of a brutal majority

India’s benchmark stock index, Nifty jumped to a new life time high of 23338.70 early Monday (3rd June) after an exit poll by various mainstream Sarkari Godi TV media predicted a minimum of 350+ seats for the ruling party BJP and almost 400+ total seats for BJP/Modi led alliance NDA in India’s general election (June’24). This mainstream exit poll of at least 350+ for BJP/Modi was far higher than the alternative Social Media exit poll around 227 seats for BJP and 33 for pre-poll BJP/NDA allies, totaling around 260 for ruling/incumbent NDA against opposition alliance IND (INC+ various regional parties) totaling around 263 seats and non-aligned (NA) seats around 20 seats.

On Monday, Nifty stumbled soon after opening at record high around 23338.70, made a low around 23062 and eventually closed around 23263.90, jumped +3.23% as the market was quite cautious about the sharp contrast between Sarkari Media and Social Media exit polls, which came true later as almost all Sarkari Media exit poll prediction has gone haywire except some states like Odisha, Delhi, Haryana, Karnataka and Bihar. Usually, such exit polls are correct when there is any specific wave in favor of any party/leader (like Modi 1.0 and 2.0), but most of the time it won’t click when there is not any specific wave; silent voters may not speak about true thinking in their minds.

On early Tuesday, Nifty made an opening high around 23159.45 and soon slid almost -1900 points to around 21268 as the exact poll was indicating Social Media projection (exit poll) of a hung Parliament rather than blockbuster Modi 3.0. But Nifty also recovered almost 700 points in the last hour of trading amid some institutional short covering/value buying 21975 after mainstream Sarkari TV Media shows Modi may first claim to form the next Federal government with the support of NDA allies totaling around 289 seats. Eventually Nifty tumbled -5.93% Tuesday (4th July) after reports that Modi will make a ‘victory speech’ at the BJP HQ in the evening.

As per provisional ECI data, the BJP has won 240 seats and BJP allies (pre-poll) have got 49 seats, totaling 289 against the simple majority mark of 273 in the 543 seats in Parliament. Against this NDA number of 289, the main opposition INC won 99 seats and pre-poll INC allies 140 seats, totaling 239 seats for IND. Also, various small regional parties and independents have got 15 seats, presently in non-aligned (NA) mode.

BJP and some of its allies have performed better than expected in some battleground swing states like Bihar, Haryana, Karnataka, MP, Odisha, Telangana, and Delhi while underperforming significantly in UP and WB. It seems that INC/Cong has also underperformed in some urban India as the Cong election narrative was mainly focused on rural India/OBC/Dalits (mostly poor section of the society), while Modi is hugely popular in rich/upper-middle-class urban India.

Now Modi/BJP/NDA has a slender majority on paper around 290 seats and is set to form the next government (Modi 3.0). But practically/hypothetically Modi 3.0 may be in some political uncertainty because bigger BJP/NDA allies like TDP (Chandra Babu Naidu), JDU (Nitish Kumar), and even Shiv Sena (Shindhe) with around 35 seats altogether may also ditch Modi at any point of time for various issues. In that scenario, even if Modi gets the support of the rest 15 NA seats/members, it may be short of 272 simple majority red marks. On the other side, present IND key ally TMC (WB-Didi) may also switch sides to NDA to support an alternative PM face of NDA like Gadkari and also to prevent Rahul Gandhi as the next IND PM.

 

Thus hypothetically/practically Modi, who never shared power and always acted like a decisive autocratic (elected dictator) leader/administrator (as PM or even CM), may now be vulnerable to the whims & fancies of various key NDA allies like JDP, TDP, SHS, etc as these allies are not natural allies; they are compulsive allies; i.e. they are forced to ditch their original/parent parties and joined BJP/NDA for the sake keeping themselves out of jail or in bail and to help Modi/BJP to consolidate power both at Federal and state government levels.

In brief, Modi 3.0 if happens with some lame duck majority, Modi may become a lame duck PM rather than the usual decisive and autocrat leader; it remains to be seen, whether Modi will be able to cope with such drastic change in Modi 3.0. Also, Modi 3.0 has to face a formidable opposition of around 240 MPs in the Parliament on various issues, and mainstream media as well as corporate houses may not extend the blind support that we have seen during Modi 1.0 and 2.0.

As BJP wins less than 272-250 seats, then Modi may be eventually 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. 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. Gadkari may be an ideal PM candidate for a coalition government under NDA rather than hard-core Modi, who may not be so comfortable with such a compromised coalition government.

Looking ahead, 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’! But most of the BJP/RSS leaders may now even seeking ‘Modi Mukta Bharat’ for his arrogant nature.

India’s election battle mainly centers on 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.

BJP had only 2 MPs in 1984 during the Cong/Rajiv Gandhi period, but then BJP/RSS played the ‘Ram Mandir’ card and the then Cong PM Rajiv Gandhi also made some strategic mistakes by opening the Babri Masjid gate. As a result of the Hindutva/Shree Ram wave (from Hey Ram), the BJP won 85 seats in the 1989 general election from the previous 2 seats. Subsequently, under Vajpayee's (PM) leadership, BJP has grown to around 140-180 seats, which soared to 280-303 seats during 2014-24 due to Modi’s popularity and decisive leadership quality along with an immense PR campaign for a God-like image in India.    

In the 2024 general election, BJP got around 36.56% of votes cast against 37.46% in 2019 and 31.34% in 2014 and INC got around 21.19% in 2024. In 2014, Modi came to power on development, Hindutva, anti-corruption, and good governance platform. There was a clear anti-incumbency (anti-Cong) wave in 2014 and the emerging Modi wave was very clear.

In 2019, Modi consolidated its position/power further on nationalism and local/global leadership appeal despite some anti-incumbent waves over core economic issues, demos, and COVID. But the public voted for Modi for continuation and nationalism. There was also a clear Modi wave in 2019.

This time in 2024, after the build-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. There was no Modi wave in 2024 unlike 2019 and 2014. But at the same time, there was no big Gandhi wave also, although some anti-incumbency wave was distinct, especially in rural/semi-urban areas/population.

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.

Modi is not comfortable with coalition politics and also decision-making, even with most BJP colleagues:

Overall India is going for a hung Parliament this time. There may be various political permutations & combinations to form the next alliance government led by BJP/NDA/Modi/Gadkari or even INC/IND. The Indian market is still discounting a comfortable Modi 3.0 and hopes for a continuation of Modinomics like in Modi 1.0 and 2.0.

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 maha-gotbandhan/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.

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. In any case, Modi 4.0 may not be possible after the 2029 election, as Modi will be almost 80 years of age by then, higher than the usual 75-year retirement policy from active politics (Marg Darshan policy of BJP). Modi alone is now adding around 100-200 seats to BJP’s normal seat share of around 150 all over India.

Thus after Modi in 2029 and in the absence of any credible successor in BJP who can match Modi’s popularity and so-called trusted/godfather-like political leadership, BJP may again come down to around 150 seats based across India along with Cong/INC’s equivalent 150 seats. In that scenario, almost 250 seats are being controlled by strong regional parties across various states.

So, coalition government/politics will be more prominent and the reality in the coming days in the absence of Modi a decisive autocratic leader, has a godfather image, thanks to the 24/7 PR campaign. Also, BJP’s parent organization RSS does not want any person/leader’s image bigger than the party and thus is not backing Modi now actively due to his apparent arrogant and autocratic nature. Various Indian political parties including major and regional ones are now virtually competing with each other over dole money/Robinhood politics targeting relatively poorer sections of the society with an emphasis on caste, religion/minority issues rather than all sections of the society based purely on economic/employment status like in developed democracy/economy.

Bottom line:

The Indian market has enjoyed the ‘Modi’ premium for the last 10 years due to political and policy stability, although despite a brutal majority/huge political mandate, Modi was only able to bring incremental rather than monumental policy reforms on the economy and some other aspects. Also, the pace of PSU disinvestments has slowed significantly in recent years, while India desperately needs additional fund support for growing deficit spending, especially for traditional infra and social infra.

In the coming days, the ‘Modi’ premium for the Indian market may reduce due to political and policy uncertainty amid the compulsion of coalition politics (N-factor-now Naidu and Nitish) even under weak Modi 3.0. For example, Modi may face various demands from his two key allies TDP (Naidu-Andhra special status) and JDU (Nitish Kumar-Bihar special status) and these two leaders have old habits of frequent flip-flops (palturams).

But if both BJP and Cong, two major political parties in India can maintain a cohesive/bipartisan economic policy despite divergent political views/ideology, then India may continue to enjoy the ‘EM Scarcity’ premium amid the appeal of 6Ds (development, demand, democracy, demography, deregulation and digitalization).

But India also needs out-of-the-box ideas or monumental reforms in various aspects for a developed economy by 2047-50 or even by 2100. India also has to strengthen institutional autonomy in the judiciary, press, election commission, competition commission, etc along with political funding and electoral process reform.

Technical trading levels: Nifty Future

Whatever the narrative, technically Nifty Future (22350) now has to sustain over 22600 for any further rally to 22800/23050 and 23350* and  23400/23525-23650*/23850*-24075 and even 25000-26000 levels in the coming days/weeks (under strong Modi 3.0); otherwise sustaining below 22550, Nifty Future may again fall to 22300/22000 and 21800*/21700-21600*/21500 and further to 21150/21000*-20400/20000* and even 19700/19400-19200/18800 and even 18500*/17500-17300/15650 in the coming days (under weak Modi 3.0 or no Modi 3.0).