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Narendra Modi will begin talks to form a government with smaller allied partners a day after election results showed Indian voters gave his Bharatiya Janata Party a weakened mandate, in the prime minister’s biggest political setback in a decade. his power.
Indian stock markets rose in early trading on Wednesday, after selling off sharply the day before, in response to a split election result that predicted a less stable political landscape for the third five-year term in office. the prime minister.
The Nifty 50 index of India’s main shares rose as much as 2.6 percent on Wednesday, after falling 5.9 percent a day earlier, mirroring a similar rise and fall by the benchmark BSE Sensex.
Shares of firms owned by Modi-allied tycoon Gautam Adani also rose after his two critical companies posted losses on Tuesday. Adani Enterprises advanced as much as 4 percent before retreating, while Adani Ports and Special Economic Zone rose as much as 6.5 percent before paring gains to 2 percent.
Final results released overnight showed the BJP had lost its majority for the first time since 2014. The ruling party won 240 seats in India’s 543-seat Lok Sabha, or lower house, where it will remain the largest party. great. The opposition INDIA bloc, led by the former ruling Indian National Congress, performed better than expected, winning 234 seats.
Modi said on Tuesday evening that he planned to form a government with smaller parties in his National Democratic Alliance, which won 53 more seats, giving the prime minister’s bloc a possible total of 293 seats.
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The results were a surprise blow to Modi and the BJP, who in the run-up to the election had targeted as many as 400 seats for the NDA. The BJP also lost ground in some of its traditional strongholds, including India’s most populous state of Uttar Pradesh in the north.
Indian newspapers offered candid assessments of the setback for Modi and the BJP. “India gives third term to NDA, Modi a message,” read a headline in the Indian Express. The Telegraph, a daily published in Calcutta in opposition-ruled West Bengal, proclaimed: “India cuts Modi”.
On Wednesday, two key Modi allies from regional parties reaffirmed their support for the NDA, which would meet later in the day for talks on forming a government. “I am firmly with the NDA,” Chandrababu Naidu, leader of the Telugu Desam Party in the southern state of Andhra Pradesh, told reporters.
Chirag Paswan, head of the Lok Janshakti party in the eastern state of Bihar, told reporters that the NDA had the “mandate of the people” to form a “stable and strong government” under Modi for another five years.
Representatives of about two dozen parties in India’s opposition would also meet in New Delhi later on Wednesday to discuss the results and future strategy, Congress president Mallikarjun Kharge wrote in a post on social media platform X.
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Bernstein predicted that the BJP and the NDA are likely to “continue with the rituals of forming a government”, while describing a “low probability” prospect in which the opposition could “remove key allies” from the BJP.
Analysts said Modi’s weaker performance could make it harder to implement bold reforms in areas such as labor and land use that they believe India needs to become a manufacturing powerhouse and lure more investment away from China. . But they added that this could limit the BJP’s nationalist aims and realign the party towards economic issues.
The results “could persuade Modi’s BJP to focus more on economic reform and job creation” and “tone down” their Hindu-majority “ethnic messaging”, said Hasnain Malik, an emerging markets strategist. based in Dubai in Tellimer.
Arnab Das, global market strategist at Invesco in London, said there was “perhaps a sweet spot for markets and expectations of reform,” but added that the outcome “could make it more difficult to unwind the labor market and the land market. ”, which includes implementation by 28 states of India.
The difficulty for the next Modi government “will be how to generate more inclusive growth, how to generate more employment to take advantage of this demographic dividend,” Das added. “The challenge is how to get there with a reduced majority.”