Aurelia Butler

However, the actual progress through the first five phases of voting has been less definitive. Lower voter turnout and potential loss of voter share in critical states like Maharashtra, West Bengal, Karnataka, and Bihar due to regional political uncertainties have cast doubts on the NDA’s ability to secure a third term.The Role of CoalitionsCoalitions have historically been crucial in Indian elections. Yet, the BJP’s dominance in the last two elections has somewhat overshadowed the role of alliances. Current opinion polls suggest that the newly formed coalition, INDIA (Indian National Developmental Inclusive Alliance), might struggle to gain significant voter share against the BJP’s sustained dominance.Election Outcomes and Market ImplicationsWhile the relationship between voter turnout and election outcomes isn’t straightforward, the current drop in turnout has introduced uncertainty, impacting financial markets. To understand the potential implications, we’ve analyzed four scenarios:1. Scenario 1: BJP Retains Single-Party MajorityIf BJP retains a single-party majority, markets will likely remain confident in policy continuity. This could lead to positive sentiment, especially if further reforms on disinvestment, the land bill, and the uniform civil code are anticipated.2. Scenario 2: BJP Forms Government with NDA Majority Should the BJP fail to retain a single-party majority but form a government with the NDA ( > 272 seats), markets might exhibit slightly less confidence due to potential fiscal consolidation delays. However, overall macro stability would likely persist, resulting in a mixed market impact.3. Scenario 3: Hung ParliamentIf the NDA fails to secure a majority (
4. Scenario 4: Change in GovernmentA new coalition, INDIA, securing a majority ( > 272 seats) could cause significant market uncertainty due to abrupt policy changes and potential reversal of NDA-implemented reforms. This would likely trigger a sharp, adverse market reaction.Markets are likely pricing in Scenario 1 as the most probable outcome, anticipating policy continuity, macroeconomic stability, and potential for further structural reforms. Any unexpected outcome could initially be perceived negatively, causing political instability and policy paralysis, impacting business sentiment and investor confidence. Such scenarios could lead to knee-jerk reactions in financial markets, with equity valuations potentially testing pre-NDA levels.From a sector perspective, a strong BJP mandate would likely boost infrastructure spending, benefiting sectors like industrials, capital goods, utilities, defense, cement, and real estate. Conversely, a weaker BJP mandate might shift focus towards consumption and lower-income households, which could be less favorable for broader markets but supportive of consumption-led sectors.Despite potential short-term volatility, historical trends suggest that the significance of election results diminishes over the medium to long term as markets and businesses adapt to new policies. Hence, significant equity weaknesses could present buy-on-dip opportunities. In fixed income, medium- to long-duration bonds remain attractive, especially if bond yields spike post-election.Offer: Click here and don’t miss out on this exclusive offer to access premium features of InvestingPro, including the powerful screeners, fair value calculator, financial health check, etc. and embark on your journey towards financial success. And the best part? InvestingPro is currently available at a 69% discount, priced at just INR 216/month.Also Read: Unlocking Investment Success: The Power of Cash-Rich Companies with InvestingPro+X (formerly, Twitter) – Aayush Khanna More

In a note to clients on Friday, the Goldman Sachs analysts said they now do not expect the Fed to roll out a rate cut until September. They had previously estimated that the reduction — which would be the first since the Fed embarked on a steep run of policy tightening in 2022 — would come in July.The decision echoes broader market expectations, with the CME Group’s (NASDAQ:CME) closely-watched FedWatch Tool indicating a roughly 45% chance that the Fed brings rates down from a more than two-decade high level of 5.25% to 5.5% in September.Statements from Fed officials this week suggested that rate-setters were in no rush to ratchet down borrowing costs. Minutes from the Fed’s latest meeting also showed that members remained worried about sticky inflationary pressures, with some even expressing a “willingness to tighten policy further” should risks appear of price growth reigniting.Meanwhile, stronger-than-anticipated business activity data and lower weekly unemployment benefit filings also dented hopes for imminent interest rate cuts. In theory, an easing in activity and a softer labor market could help defuse inflation — the ultimate goal of the Fed’s hiking cycle.”[A] July cut would likely require not just better inflation numbers but also meaningful signs of softness in the activity or labor market data. After the stronger May [purchasing managers’ index data] and lower jobless claims, this does not look like the most likely outcome,” the Goldman Sachs analysts said.Fed officials will have the chance to parse through four separate consumer price index releases by its September meeting, the Goldman Sachs analysts said. They argued that they believe most members of the rate-setting Federal Open Market Committee would then be open to slashing rates if “monthly core CPI inflation averages in the high 20s” and the core personal consumption expenditures index hovers around “the low 20s.”However, they flagged that even if inflation improves by September, it will be “hardly perfect and still at a year-on-year rate that makes cutting a less than obvious decision.” More

BERLIN (Reuters) – The implementation of the second pillar of the global minimum tax deal is Germany’s priority and further ideas should not be discussed until there is an agreement on the first pillar, German Finance Minister Christian Lindner said on Friday. “In the second pillar we already have this in national legislation in Germany,” Lindner said at a press conference on the sidelines of a meeting with his G7 counterparts in Italy. “Current work focuses on the first pillar.”The tax is mainly for U.S.-based digital giants, with a so-called “first pillar” aimed at reallocating taxing rights on about $200 billion of corporate profits to the countries where the companies do business.The United States has threatened retaliatory tariffs against European countries if they implement the first pillar, which is stuck in negotiations. Countries are meanwhile implementing the second pillar of the global minimum tax deal.That part of the accord tries to ensure companies with revenue greater than 750 million euros ($800 million) pay a global minimum rate of 15% by allowing governments to apply a top-up tax on revenues earned in countries with lower rates.As negotiations on the first pillar continue, the German government is “extremely sceptical” about new components of a global tax agenda, the minister said. “We have to concentrate on implementing what we have already worked on,” Lindner said in Stresa, Italy. “Overloading the global tax policy agenda would only result in us achieving less than possible.”($1 = 0.9227 euros) More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Data released today for Japan shows that inflation is not stickier or more persistent than expected, making a surprise BoJ rate hike in June unlikely.In April, headline annual CPI in Japan rose 2.5 per cent, a deceleration from March’s 2.7 per cent rate. Core inflation, which excludes food but not energy, slowed to 2.2 per cent from 2.6 per cent in March, in line with expectations.Services inflation, an indicator of domestic inflationary pressures, decelerated to 1.7 per cent in April from 2.1 per cent in March.The yen was broadly flat on the news, although it has weakened by 0.8 percentage points over the course of this week.The data does not indicate that inflationary pressures are strong enough to justify an early hike. We therefore continue to expect the BoJ to hold the benchmark rate at the current level at the upcoming June meeting.Beyond June, the BoJ will be watching indicators of economic activity and consumption, wage growth, and yen weakness.Data released over the past few weeks has cast some doubt on the Japanese economy’s momentum, although the BoJ will have several additional data points on inflation and wage growth by July.Last week, GDP data for the first quarter of 2024 showed that headline GDP fell 0.5 per cent on a quarterly basis, worse than expectations of a 0.3 per cent contraction. Consumption undershot even more, dropping 0.7 per cent compared to the previous quarter.Wider measures of wages have also been weak and have not yet shown any pass-through from the record shunto wage settlement, which occurred in March, to smaller companies’ wage bills. However, the indicators we have so far suggest that private demand remains subdued, with wage growth too slow to encourage Japanese consumers to spend.In recent days, the BoJ has been letting 10 year government bond yields rise to over 1 per cent, tightening financial conditions. We think it finds this preferable in the short term to raising policy rates. We continue to expect the BoJ to deliver one additional rate hike in 2024, taking the benchmark rate to 0.1-0.2 per cent by the end of this year. More

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