Ahead of Bihar election results on Friday, market watchers betting that an National Democratic Alliance (NDA) majority in the state would give Indian equities a lift.
After early trends showed the NDA inching well past the halfway mark, the markets held their ground at a time global markets were distinctly weak. Benchmark indices, Nifty 50 and BSE Sensex, were down around 0.27% in afternoon—a much milder correction compared to bourses elsewhere.
At 1.20pm, the NDA was well past the majority mark with leads in 200 seats in a 243-strong state assembly, while the Mahagathbandhan, the main opposition group, was ahead in 39.
Bihar’s poll outcome was watched closely whether its impact would extend to the political balance in New Delhi and affect how confident investors feel about policies staying on track.
A Reuters report noted that winning Bihar is crucial because it is India’s third-most-populous state with nearly 130 million people and sends the fifth-highest number of lawmakers to Parliament among states.
If the ruling coalition lost in Bihar, worries were whether the NDA government at the Centre—in office with the support of coalition partners Telugu Desam Party, or TDP, in Andhra Pradesh and Janata Dal (United), or JD(U), of Bihar—would be up for political realignment, experts had noted.
“If the NDA were to lose Bihar and the ripple effect extends to the Centre, leading to an INDI coalition government under leaders such as [JD(U)’s] Nitish Kumar or Chandrababu Naidu [of TDP], markets would likely experience a sharp, short-term risk-off phase driven by political uncertainty,” according to a strategy note by Incred Research Services dated 12 November.
History shows that when dominant-party stability gives way to coalition ambiguity, markets get jittery. This was seen just after the 2024 Parliament election results—the NDA fell short of a majority—when the Nifty 50 fell 6% in a single day with investors quickly pricing in risks around policy continuity, fiscal prudence, and reform momentum. So, one could expect near-term volatility across indices, foreign outflows, and a temporary repricing of India’s “stability premium” if the NDA had done badly in Bihar, as per the note.
Best among falling markets
Zooming out, V K Vijayakumar, chief investment strategist at Geojit Financial Services, highlighted that Indian equities stood out by outperforming all major global markets on Friday. He points out that if it weren’t for the better-than-expected cues from the Bihar polling results, the Indian market would likely have taken a much harder knocking given the global sell-off.
India’s Nifty 50, down 0.28% at around 1.20pm, held up far better than its global peers. Taiwan’s Taiex and Japan’s Nikkei are lower by about 2% each, South Korea’s Kospi has slumped 3.5%, and Hong Kong’s Hang Seng is down 1.5%. Overnight, the S&P 500, NASDAQ and the Dow Jones Industrial Average also slid roughly 2% each.
Even though India has lagged other markets over the past year, Vijayakumar still thinks domestic equities are far from cheap. Nifty, he notes, is trading at over 20 times FY27 estimated earnings, well above its 10-year average of 19 times.
That said, he feels Indian equities could get a fresh burst of energy as earnings pick up. He expects FY26 earnings growth to remain subdued at about 8-9%, but sees FY27 shaping up better with an expectation of 13-15%.
Even Goldman Sachs now sees room for Indian equities to do better over the coming year, supported by the Reserve Bank of India’s easing measures (rate cuts, improved liquidity, and bank deregulation), GST reductions, and a slower pace of fiscal consolidation that could help drive a growth recovery over the next two years. In its 7 November strategy note, the global firm upgraded its stance on Indian equities to overweight.
Market participants believe some global positives could also be on the horizon driving Indian equities higher, with the likely end of the US shutdown and encouraging signals around the India–US trade deal, though the timeline for the latter still remains unclear.
