The stock markets will rally ahead after the general elections later this year, if it is won by an alliance led by either Congress or BJP, global financial services major HSBC has said.
It would be negative for the Indian stock markets if the next ruling alliance includes the Left parties, and even worse would be the case of a third front government or a hung Parliament, equity analysts at HSBC said in a report.
HSBC is very optimistic about the Indian economy and the stock markets recovering in the second half of the year and believes that the corporate earnings in New Delhi would start recovering after remaining under pressure in the first six months of 2009.
While falling interest rates, lower commodity prices and increased oil and gas output would trigger the much-needed growth momentum, analysts said, the general elections "could be a major catalyst, especially if the winning coalition is business friendly and can step up economic reforms".
The elections are expected to be held in April-May.
In its analysis of market reaction to the outcome of the polls, HSBC said that market would react with a "rally" if either a Congress-led or BJP-led alliance wins the elections. However, it would be a "mild negative" if Left parties part of the in the next ruling alliance led by Congress, the report said.