Bihar Election Results Boost Market Confidence,Signals Policy Continuity: Motilal Oswal Analysis
The recent victory of the ruling coalition in bihar,securing 202 out of 243 seats wiht a 46.6% vote share, has exceeded expectations, even surpassing optimistic exit poll predictions. According to a report by Motilal Oswal, this win is particularly significant given the presence of a strong opposition, a new political entrant, and the challenges of four consecutive terms in power. The firm suggests the decisive outcome indicates a potential shift in Bihar’s political focus towards development and improved governance.
For financial markets, the result reinforces the stability of the ruling coalition, a factor investors were monitoring following the 2024 general elections. Concerns about political cohesion had already begun to ease after strong performances by the National Democratic Alliance (NDA) in Maharashtra, Haryana, and Delhi. The Bihar verdict further solidifies this stability, coinciding with a favorable macroeconomic habitat and supportive government policies.
Motilal Oswal highlights several concurrent positive factors, including ongoing reforms and growth-oriented measures implemented by both the Reserve Bank of india (RBI) and the government. These are coupled with an improving earnings outlook, policy initiatives designed to stimulate demand, and a period of underperformance for Indian equities relative to global markets. Since September 2024, the Nifty has declined by 1%, while the MSCI Emerging Markets index has risen by 20%, accompanied by a substantial outflow of $27.7 billion in Foreign Institutional Investment (FII). In this context, the brokerage believes the Bihar election outcome contributes to a broader set of conditions that could support a sustained market uptrend.
while acknowledging the long-term socio-economic implications of the mandate, Motilal Oswal emphasizes the immediate benefit for investors: the continuation of existing policies and increased operational flexibility for both the central and state governments, described as a “double-engine” framework.The brokerage anticipates that initial market reactions will be followed by close monitoring of key indicators, including the effectiveness of GST 2.0 in boosting consumption, future actions by the RBI, macroeconomic data, and, crucially, the performance of corporate earnings.
Regarding earnings, the recently concluded second quarter of fiscal year 2026 (2QFY26) showed encouraging improvements. Profit after tax across Motilal Oswal’s coverage universe was 3% above estimates, and sales were 2% higher. Large-cap companies exceeded expectations by 2%, while mid-caps saw an 8% beat. Small-cap companies,however,lagged with an 8% miss. The brokerage views this increase in positive surprises as a potential indicator of stabilizing earnings momentum, driven by improving demand fueled by GST 2.0 rate reductions, lower interest rates, and tax benefits for middle-income consumers.
Motilal Oswal reiterates its positive outlook on Indian equities, citing improving earnings momentum, reasonable valuations – with the Nifty currently trading at a multiple of 21.1, slightly above long-term averages – and a government committed to supportive policies.With favorable macroeconomic indicators and the potential for a slowdown in FII selling, the brokerage considers the Bihar mandate as an additional factor bolstering policy stability and investor confidence.
Ultimately, Motilal Oswal assesses that the NDA’s strong performance in Bihar strengthens the government’s capacity to maintain its current policy course and adapt it to changing economic needs, a continuity that the market is likely to favorably receive.
Disclaimer: recommendations,suggestions,views and opinions given by the experts are their own. These do not represent the views of the Economic Times.
