Bihar Verdict Shields Indian Markets from Global Storm
Indian equities demonstrated remarkable resilience on Friday, largely insulated from a widespread global sell-off, as early trends indicated a commanding lead for the National Democratic Alliance in the crucial Bihar assembly elections. Market analysts confirmed that the political clarity emerging from Bihar provided crucial support to investor sentiment at a time when international markets were experiencing significant pressure.
By 1:20 PM, the NDA had surged past the majority mark, leading in 200 seats within the 243-member state assembly. In contrast, the primary opposition coalition, Mahagathbandhan, was ahead in merely 39 constituencies. This decisive performance helped Indian benchmarks weather the global downturn with much milder corrections compared to other major markets worldwide.
Market Performance Defies Global Trend
While the Nifty 50 and BSE Sensex registered declines of approximately 0.27% during afternoon trading, this minimal correction stood in stark contrast to substantial losses witnessed across global exchanges. Taiwan's Taiex and Japan's Nikkei both fell around 2%, South Korea's Kospi plummeted 3.5%, and Hong Kong's Hang Seng dropped 1.5%. Overnight, American indices including the S&P 500, NASDAQ, and Dow Jones Industrial Average had each declined roughly 2%.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, emphasized that Indian equities outperformed all major global markets on Friday. He noted that without the positive surprise from Bihar polling results, the Indian market would have likely suffered much more severe damage given the intense global sell-off environment.
Why Bihar Matters for National Politics and Markets
The significance of Bihar's electoral outcome extends far beyond state boundaries, potentially influencing the political equilibrium in New Delhi and shaping investor confidence in policy continuity. As India's third-most-populous state with nearly 130 million residents, Bihar sends the fifth-largest contingent of lawmakers to Parliament among all states.
Financial experts had expressed concerns that an NDA defeat in Bihar could trigger political realignment at the Centre, where the ruling coalition depends on support from partners including Telugu Desam Party (TDP) from Andhra Pradesh and Bihar's own Janata Dal (United). A strategy note from Incred Research Services dated November 12 had warned that if the NDA lost Bihar and ripple effects reached the Centre, potentially leading to an INDI coalition government under leaders like Nitish Kumar or Chandrababu Naidu, markets would likely experience a sharp, short-term risk-off phase driven by political uncertainty.
Historical precedent supports this assessment. Following the 2024 Parliament election results, when the NDA fell short of a majority, the Nifty 50 witnessed a 6% single-day decline as investors rapidly priced in risks surrounding policy continuity, fiscal discipline, and reform momentum.
Future Outlook for Indian Equities
Despite India's underperformance relative to other markets over the past year, Vijayakumar believes domestic equities remain far from inexpensive. The Nifty is currently trading at over 20 times FY27 estimated earnings, exceeding its 10-year average of 19 times. However, he anticipates Indian equities could receive renewed momentum as corporate earnings accelerate, projecting FY26 earnings growth at 8-9% with FY27 potentially reaching 13-15%.
Global financial powerhouse Goldman Sachs has also turned optimistic about Indian equities, upgrading its stance to overweight in a November 7 strategy note. The firm anticipates supportive measures from the Reserve Bank of India—including rate cuts, improved liquidity, and bank deregulation—combined with potential GST reductions and a measured pace of fiscal consolidation could drive growth recovery over the next two years.
Market participants identify additional positive catalysts that could propel Indian equities higher, including the likely resolution of the US shutdown and encouraging developments regarding the India-US trade deal, though the timeline for the latter remains uncertain. The Bihar election outcome has thus provided crucial near-term stability to markets that were bracing for potential political turbulence.
