With the sweeping victory in the Indian state of Uttar Pradesh by the Bharatiya Janata Party (BJP), a national political party that has majority seats in the Parliament and prime minister Narendra Modi is an important figure of it, the equity market witnessed rejoicing.
Despite an increase in the inflation rate, poor handling of COVID-19's second wave in April 2021 and significant unemployment rate, the assembly election results gesture strong support for the nation's ruling party.
Both BSE and Nifty50 jumped by more than 2 percent before rebounding due to the effect of the intense Russian-Ukraine conflict. Market analysts have warned investors the volatility may continue for some days amid diplomatic talks between the two countries.
The win of BJP in Uttar Pradesh means the continued popularity of Modi ahead of the general elections scheduled to be held in 2024. The results put a stamp on a governance model that combines populist, communal, religious and strongman politics appeal along with serious economic woes.
Uttar Pradesh is important in the federal parliament as it accounts for eighty seats of 453 in the lower house.
With respect to the market responses over the results, analysts suggest it is a buying opportunity for the traders. The sectors which had performed well in the recent past include information technology, pharma, energy and metals.
Meanwhile, it is important to observe how the Indian markets respond to the ongoing Russian invasion of Ukraine and the sanctions imposed by Western allies on Russia like removing the Russian banks from the international SWIFT payment systems and imposing a ban on imports of oil and gas from the country.
Russia has offered India to import oil at a discounted rate and the deal is now being implemented by making payments in USD. This may help India to benefit monetarily and the rising oil prices may become stable or vice versa.
Russian armed forces have invaded several Ukrainian cities where buildings have been destroyed in great numbers. A good population of Ukrainians has been displaced. The United States and NATO have refused to send troops to fight against Russia directly as the move may pave the path to another world war.
Meanwhile, it is reported that Russia may attack Poland in the near future and about fifty percent of Kharkiv's population has fled. The fuel depot near the capital Kyiv has been destroyed by a Russian missile strike and Germany has announced halting the imports of Russian coal from autumn.
The war has entered into the fifth week and there seems no possibility of any successful peace talks.