Equity markets in India will fall if Prime Minister Narendra Modi’s party fails to retain power in national elections due next year, according to Chris Wood, the global head of equity strategy at Jefferies LLC.
If the ruling Bharatiya Janata Party faces a surprise defeat in the national polls, as happened in 2004, "then I would expect a 25% correction if not more," Wood said at an industry event organized by the Business Standard newspaper in Mumbai.
Wood said the government has implemented reforms such as the ambitious output-linked incentive programs to attract global supply lines, which will not be undone, but "there will be a big correction," he said. "The momentum is such that it will bounce back."
In May 2004, stock markets in India plunged about 20% in two days after the BJP-led government suffered a surprise defeat in national elections. The markets recouped some of the losses over the next few days after a Congress party-led coalition government assured the country and markets of retaining policies aimed at opening the South Asian economy."
“India is the best growth story in the world going forward and most particularly in Asia and obviously the problems in China have further cemented that view," Wood said.
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