One can barely argue with Mehta as he opines that politics is largely an emotional side of humans, but the markets behave rationally. And therefore, majority are shocked to see the market falling after clear trends of an election outcome. According to Mehta, internals of the market were far weaker this time because open interest had increased by only 5% after the exit polls, but there was a massive increase in open interest after the 2014 exit polls. “This clearly showed that sentimentally Mr. Market was supporting bulls but hard money was not flowing in,” he adds.

Prabhat Awasthi, Nomura’s country head for India, points at a bigger question for the longer term: Whether NDA 2.0 would be materially different from NDA 1.0?

“The upside scenario for the economy and the market is that as the benefits of some of the structural reforms such as the goods and services tax (GST), Bankruptcy Bill, etc., start flowing in, the government moves and focusses on the next round of policy reforms” says Awasthi.

In a separate economy-focussed report by Nomura Securities, Singapore-based Sonal Varma and Mumbai-based Aurodeep Nandi opine that, unlike the BJP’s first term, where prudence came at the cost of growth, the policy priority in the second term will be reigniting growth with prudence as a secondary priority.

“We do not foresee a major reversal of the current (weak) economic conditions in the short term, although policy continuity and the end of political uncertainty would be a positive."

The duo is of the view that if the current pace of reforms sustain, then India’s potential growth over the next five years should rise to nearly 7.5% from around 7% currently. “However, if the new government manages to leverage its political capital to invigorate private investment, then we believe potential growth could rise to around 8%,” they write.

It would not be unfair to say that the election euphoria lasted for the first 105 minutes, after which rationality in the equity market ensured that the election results gradually started turning into a non-event.

Election Result 2019

At the end of the political game, rationality wins in markets