India vote boosts Prime Minister Modi’s party, BJP gains in Karnataka

Manjunath Kiran | AFP | Getty Images

Indian Prime Minister Narendra Modi gestures to supporters during an election campaign rally in Bangalore on May 3, 2018.

India’s Nifty 50 stock exchange gained 0.9 percent on a suspected BJP win earlier in the day, but pulled back on the instability to close flat.

The BJP win reflects solid support for Modi, whose leadership has brought controversial economic reforms to the world’s fastest growing major economy. Since taking power in 2014, Modi has axed the country’s two largest banknotes in a sudden decision to clamp down on currency fraud.

Last year his government introduced the Goods and Services Tax, which unifies the country’s consumer taxation system across its states.

Congress, the party of India’s first prime minister after independence from the U.K., has struggled against Modi’s popularity and now only governs three of India’s 29 states.

But, market instability could be short lived.

“Investor attention will very quickly turn to the campaigns in the three big northern states scheduled for polls later this year,” said Shumita Deveshwar, senior director for India research at TS Lombard, in a note Monday. “Those polls will be more indicative of the BJP’s popularity as northern India is the party’s traditional stronghold,” she explained.

Karnataka’s capital is technology hub Bangalore. The state is home to 64 million of India’s 1.3 billion population.