Victory of the Aam Aadmi Party (AAP) in Delhi announced on Tuesday will have no long-term impacts to stocks, with Delhi being a small part of the overall market in India.
“A victory of the AAP government bringing a setback to markets is a narrow view to take,” said Sadanand Shetty, a senior fund manager at Taurus Mutual Fund. “Ultimately, all parties want growth, and economic recovery is not something specific to Delhi and Delhi only.”
Delhi holds very little weight, accounting for only seven seats out of 43 Lok Sabha seats. However, markets were concerned that an upset in the capital would weight heavily on the Modi’s government, as reforms would become tough to push through.
However, the concerns are unjustified, according to Tejas Doshi, an independent investor who feels the AAP victory will form a good reality check on the BJP government.
“No government should be too powerful or over-confident,” said Doshi. “Power should not move to one person.”
Similarly, concern for power-sector stocks are thought to be only a knee-jerk reaction. “I don’t think power stocks should go down, as the AAP government has promised that they will reduce rates based on a technical audit after checking where they can cut prices,” Doshi said.
Similarly, real estate stocks were expected to drop, as investors worried that an AAP-led government would delay approvals required by companies to construct new homes and would focus on low-cost housing for the poor.
However, Shetty refuted that real estate stocks would be affected. “Delhi is a small part of the overall Indian market.”
“Real estate stocks have moved too high and a natural correction is eminent,” said Doshi. “Incomes do not match real estate prices, which have moved too fast.”
It was felt the victory would have no impact on foreign institutional investment. “Foreign investors will continue to come in India, as the economy revives,” said Shetty.