2019 Polls May Throw Up A Weaker Coalition Government: Morgan Stanley

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Morgan Stanley said a weak coalition government is one of the biggest concerns for investors, which is a possibility in 2019

MUMBAI (PTI) — With the general elections nearing, Wall Street brokerage Morgan Stanley on Tuesday said a weak coalition government is one of the biggest concerns for investors, which is a possibility in 2019. And it is unlikely that the market will be as optimistic this time around as it was in the past election.

“The world’s biggest democratic elections are 12 months away and the market is likely to start pricing in the election outcome in the coming months,” a Morgan Stanley report said.

“Since 1991, every election has been preceded by a coalition government; hence, the market has had room to be hopeful of a stronger government,” Morgan Stanley said. “It enters the 2019 polls with a majority government already at the helm. So, it has to deal with the prospects of a weaker government at the centre.”

But the brokerage was quick to add that “overall assessment of the current state of indicators favours the incumbent. Growth is looking up, inflation is stable, farmers’ sentiment is likely improving, transfers are rising, and jobs are coming back. However, the indicators may shift in the coming months-and together with them, the election outcome.”

Basing its pessimism to the past five general elections, Morgan Stanley says while the usual approach of the market in the run-up to the polls is one of optimism, the big change from the past is that none of the elections since the mid-90s has started with a majority government in the run-up to the polls.

 The report also identifies economic indicators grouped in five categories — growth, inflation, farmer sentiment, direct benefit transfers — which if in good shape can result in re-election of the incumbent government.

The brokerage feels that these economic indicators ignore the social and political debates which occupy the center stage in any election and to that extent, they are a simplification of estimating poll outcomes.

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