'Bihar poll results give NDA an opportunity to strategise'

The Bihar election results give the NDA an opportunity to strategise for the upcoming state elections and also embark on longer term corrective measures.

"The election results of Delhi and Bihar make us believe that state elections are mostly a referendum on local issues and local leader, while national issues and central leadership could have little bearing on them," ICICI Securities said in a research note, adding that the silver lining is that it gives the NDA an opportunity to "strategise".

Moreover, it would give a chance to the NDA to focus on factors which would appeal to the electorate like development, employment, safety, low inflation as there is three and a half years to go for the next general elections in 2019, ICICI Securities said.

"We expect the government to pursue the reform agenda with renewed vigor by speeding up the reforms and decision making process through the executive route although legislative route might continue to be challenging," it added.

Meanwhile, global brokerage firm DBS in a research note said it is "premature" to assume that these election results might derail the reform process and tilt the balance away from developmental reforms and encourage a populist agenda.

"However, it is clear that getting key legislations, especially land, labour and GST, past the winter session of Parliament (late November) will be tougher than before.

"It remains to be seen if an anticipated Cabinet reshuffle and watering down of provisions cuts any ice with opposition parties," the DBS report added.

The ICICI Securities report noted that the Indian economy is slowly improving with urban consumption showing signs of revival; government spending improving; inflation remaining benign; and comfortable government fiscal deficit.

For stock markets, the Bihar election outcome is a clear negative and can hamper the NDA's attempt to strengthen its position in the Rajya Sabha.

It could also embolden the opposition parties in intensifying their resistance towards key reforms such as GST and Land bill.

However, going forward, the markets are likely to consolidate. "With uncertainties around Bihar elections and Q2FY16 results largely behind us, we expect Indian equities to consolidate at current levels," ICICI Securities said, adding that retail participation continues to be impressive with October recording inflows of Rs 6,000 crore although FII flows have turned negative in November.

Going ahead, the pace of domestic reforms and global factors, especially the US Fed rate hike, could decide the course of the market, the report added. The Grand Alliance routed the BJP-led NDA in Bihar to score a landslide two-thirds majority in the Assembly polls.

The newly-formed JD(U)-RJD-Congress alliance secured 178 seats in the 243-member House, while the BJP-led NDA bagged only 58 seats.