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UBS Investment Research
India Market Strategy
E lection overhang behind, reforms ahead?
Event - 5 state assembly elections results
The results of assembly elections in 5 states, including the key states of Tamil
Nadu, West Bengal and Kerela, are out. The ruling central government (UPA) won
in 3 states while losing in 2 states.
Impact - Sentiment positive; West Bengal can add to growth
TN and West Bengal results are key sentiment positives. West Bengal may imply
another state beginning to contribute to India’s GDP growth (case study is Bihar,
which after change in 15 year old regime, led to improved economic performance).
TN verdict impact can be complex as it may lead to continued focus on corruption
as a political issue leading to volatile political environment. TN elections’ outcome
is most relevant in terms of arithmetic for UPA Govt majority – any DMK walk
out of Govt in face of continued corruption cases, may create survival scare in the
interim. Kerala/Assam win for Congress may not have any meaningful impact.
Action - Government may focus on reforms; petrol price hiked already
Ex the risk of DMK pulling out, we believe that election uncertainty overhang is
behind us. The Govt may focus on accelerating key reform areas (relaxation of FDI
norms, decontrolling diesel prices, execution delays in infrastructure projects)
which could be a positive for markets. The government has already made the move
of reining in fiscal deficit by raising the prices of petrol by Rs5. It is also expected
that the prices of diesel and LPG will be raised in next few days. The Prime
Minister is also likely to go for cabinet reshuffle in next few weeks to tackle issues
of non-performance and corruption. Our key top picks are Bharti, Coromandel,
Federal Bank, Havells, ICICI Bank, Idea, Infosys, and Maruti.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
India Market Strategy
E lection overhang behind, reforms ahead?
Event - 5 state assembly elections results
The results of assembly elections in 5 states, including the key states of Tamil
Nadu, West Bengal and Kerela, are out. The ruling central government (UPA) won
in 3 states while losing in 2 states.
Impact - Sentiment positive; West Bengal can add to growth
TN and West Bengal results are key sentiment positives. West Bengal may imply
another state beginning to contribute to India’s GDP growth (case study is Bihar,
which after change in 15 year old regime, led to improved economic performance).
TN verdict impact can be complex as it may lead to continued focus on corruption
as a political issue leading to volatile political environment. TN elections’ outcome
is most relevant in terms of arithmetic for UPA Govt majority – any DMK walk
out of Govt in face of continued corruption cases, may create survival scare in the
interim. Kerala/Assam win for Congress may not have any meaningful impact.
Action - Government may focus on reforms; petrol price hiked already
Ex the risk of DMK pulling out, we believe that election uncertainty overhang is
behind us. The Govt may focus on accelerating key reform areas (relaxation of FDI
norms, decontrolling diesel prices, execution delays in infrastructure projects)
which could be a positive for markets. The government has already made the move
of reining in fiscal deficit by raising the prices of petrol by Rs5. It is also expected
that the prices of diesel and LPG will be raised in next few days. The Prime
Minister is also likely to go for cabinet reshuffle in next few weeks to tackle issues
of non-performance and corruption. Our key top picks are Bharti, Coromandel,
Federal Bank, Havells, ICICI Bank, Idea, Infosys, and Maruti.
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