(May 6): Indian Prime Minister Narendra Modi tightened his grip on power after a historic win in West Bengal, a result that may spur infrastructure spending and industrial stocks in a market otherwise lacking catalysts, according to analysts.
Stronger coordination between the federal and state governments may speed approvals and spending in power, steel, roads and railways, according to analysts at Citigroup Inc and Bloomberg Intelligence.
Shares of Adani Group, often viewed as aligned with Modi’s policy goals, and Andrew Yule & Co rose after after Modi’s Bharatiya Janata Party ended Mamata Banerjee’s 15-year rule in the key eastern state.
Indian equities have rebounded from their Iran war-driven lows, but remain sensitive to global sentiment and continue to lag peers. In this context, local policy push may provide support for a market grappling with record foreign outflows, elevated valuations and a lack of artificial intelligence-driven growth catalysts.
“The election win allows him to continue with his agenda,” said Joshua Crabb, the head of Asia-Pacific equities at Robeco Hong Kong Ltd. “It shows that after recent setbacks, his popularity has increased again and should be supportive for his reforms including infrastructure.”
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Infrastructure and manufacturing stocks have outperformed India’s benchmark this year, underscoring investor preference for capex-linked themes tied to government spending and industrial growth.
The NSE Nifty Infrastructure Index is down 1.6% versus a roughly 8% drop in the benchmark over that period, while the NSE Nifty India Manufacturing Index is up about 1.7%.
A win in India’s third-largest state extends the BJP’s momentum, with victories in eight of 12 state polls since Modi lost his parliamentary majority in 2024. Still, markets will need clear on-the-ground execution to justify optimism.
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Despite a significant scale-up in India’s infrastructure push, project execution has often lagged allocations due to land, regulatory and state-level capacity constraints. Some analysts see closer alignment between the centre and states helping clear these hurdles.
“Markets would hope that a strong political mandate and easier coordination with state governments will facilitate better implementation of various policy and process reforms,” Citigroup Inc economists including Samiran Chakraborty wrote in a note.
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