With the Congress winning Karnataka, all eyes are on next year’s general elections when the BJP will be seeking a third term under the leadership of Prime Minister Narendra Modi.

Market analysts at Kotak say the Congress’s resounding victory in the Karnataka assembly elections may not mean much for in the 2024 elections due to the high popularity of Modi still being seen in the country despite growing unemployment and rising inflation in the country. The past trend of BJP outperforming in national elections despite setbacks in state elections is also a fact. The market has recently found support from improved macro-outlook and low-quality earnings in the March quarter of the FY23 results season but largely ignored a weak micro-outlook and growing disruption risks, which may weigh on ‘rich’ multiples of growth stocks.

Despite the large fall in the number of seats, the BJP’s vote share in the current election witnessed a marginal decline compared to 2018 at 36 per cent. While the election results may introduce some ‘political risk’ to markets and rejuvenate the opposition, it is noted that Mr Modi continues to enjoy a high approval rating at the national level.

Analysts note that the BJP’s performance in the 2018 state elections was quite modest, when the party was unable to win a simple majority in Chhattisgarh, Karnataka, Madhya Pradesh and Rajasthan, but it had managed to form governments in Karnataka and Madhya Pradesh subsequently. Meanwhile, the BJP outperformed significantly in the Lok Sabha elections in 2019 in these states and crossed the 300 seats mark. Hence, analysts do not expect markets to be overly perturbed even if the BJP was to lose in the forthcoming state elections.