Stock market on Monday gave thumbs up to exit polls that suggested 350-plus seat wins for the BJP-led NDA in the six-week long Lok Sabha elections, whose fate is now seated in EVM machines. While the Narendra Modi-led BJP's win was and is the base case, analysts said all eyes are on actual BJP win counts on Tuesday, June 4, as exit polls had a mixed success in rightly predicting election outcomes in past few instances.
In the past two elections of 2014 and 2019, for example, Nomura India noted that the exit polls had predicted the NDA seat counts, which were lower than the actual results.
"We think it would be inappropriate to extrapolate the past trend and suggest a larger NDA seats vs the exit poll. Nonetheless, given the unanimity across all the exit polls, we think the formation of a stable NDA government is the most likely outcome," Nomura India said.
Antique Stock Broking said exit polls have a chequered history with incorrect predictions in 2004, 2009 general election as well as in the recent 2023 state assembly elections of Chhattisgarh and Karnataka.
"In few other instances, exit polls underestimated the NDA margin of victory in 2014 and 2019 general election and 2023 Madhya Pradesh state elections," it noted.
Emkay Global said even as exit polls are not definitive, the margin of errors have been lowered in the last two election cycles. "Final outcome, if in line with exit polls, would likely calm investor nerves as political and policy continuity will be good for risk assets in the immediate run and macro stability in the medium term.
Will the market sustain gains? Elara Securities said empirical evidence suggests election years are positive for the equity markets. In each of the past four election years, the Nifty 50 has given a average return of 32 per cent, with significant contribution coming from post-election returns.
"Broader markets tend to do even better. Pre-election performance varies, but post-election rallies have historically been broad-based, resulting in positive returns across sectors. With the Nifty yielding 4 per cent in CY24 to date, there remains huge upside potential for a post-elections rally," it said.