This analyst feels a decisive BJP win in the states and 2024 general elections might fuel another market rally

A BJP lead overall is incrementally positive news for the markets, Emkay said. "This is likely to add another leg of rally to the markets, as policy continuity will be viewed as positive growth-shock in the medium term," the brokerage wrote in a note.

Emkay expects the recent rally to continue in the immediate term. It said the impact of politics on markets over the next two quarters will be clearer after the final results.

The results, if in line with exit polls, should bolster BJP’s position, the brokerage noted.

The elections in these five states have been touted as the precursor to the 2024 general elections. "Exit polls are a better barometer of result than the opinion polls, and are able to direct the trend, even as they are not quite accurate in terms of seats," Emkay said.

The Chhattisgarh lead, Emkay said, should be a major positive for the Congress, as it has found it difficult to retain states in the last decade.

"Anti-incumbency seems to be catching up in Telangana, as KCR seems to be trailing after being the only chief minister since the state's inception in 2014. Mizoram exit polls, on the other hand, are depicting a close contest between the two regional parties—ZPM and MNF," it said.

While both, Madhya Pradesh and and Rajasthan, are seen as a bi-polar contest between the Congress and the BJP, each Rajasthan election has traditionally seen the incumbents losing and paving the way for the opposition to form the government, Emkay said.

"To that extent, the Rajasthan exit poll is not much of a surprise despite the BJP not projecting any chief minister candidate. We note that Rajasthan election trends have shown that the BJP generally wins in Rajasthan with a big margin, whereas the Congress barely manages to scrape through. Meanwhile in MP, where the Congress took the initial lead in the opinion polls, BJP is showing regained momentum in early exit polls – a strong sign of it overcoming anti-incumbency. The government's Ladli Behna Yojna for women seems to have aided a positive swing in the state," it said.

Emkay reckoned that state elections have had very little bearing on the general elections in the recent past. The run-up to the 2019 general elections had seen the BJP perform badly in these same states, and yet they still won by a resounding margin.

The brokerage said that it will look for three key factors in the final results.

1) First, the margins of victory in the states – if the BJP wins decisively, it will boost its already-robust chances of winning the 2024 elections with a clear majority.

2) Second, the success of the BJP's tactic of projecting Prime Minister Narendra Modi as the face of the campaign, especially in MP – reinforcing the consensus view that the BJP is on the front-foot for 2024.

3) Third, any deviation in spending trends in social sector schemes in the election outcome. "While we think that fiscal prudence for the NDA government has been a non-negotiable issue, any market fears of government deviating from fiscal discipline will be pacified if the BJP wins the key states with a comfortable majority."