Nitish Kumar resigned as the Chief Minister of Bihar, hours after Rashtriya Janata Dal (RJD) President Lalu Prasad Yadav ruled out resignation by his son and Deputy Chief Minister Tejashwi Yadav from the RJD-Janata Dal (United) alliance government.
It was impossible to continue ruling the state under the current circumstancesNitish Kumar
The resignation comes just 20 months after the Grand Alliance came in power in BIhar, and only days after differences cropped up between JD(U) and RJD as Tejashwi Yadav faced calls for his resignation. The Central Bureau of Investigation recently lodged an FIR against him and his family in connection with the land-for-hotels case.
What does the split in Bihar’s Grand Alliance mean for India’s stock market?
India’s Risk Premiums To Fall
Bharatiya Janata Party's sweeping victory in the Uttar Pradesh elections in March had boosted investor sentiment which led the markets to rally, one which has still continued with some corrections. After the results of that election, India was getting valued on the expectation of long-term stability, said Ajay Bagga of OPC Asset Solutions.
Now this move in Bihar adds to the perception of political stability and will have an impact on India’s risk premium going down.Ajay Bagga, Executive Chairman, OPC Asset Solutions
Markets To Remain Unaffected?
Kumar’s resignation may bring a “much needed correction”, but that too seems doubtful, said Sanjay Dutt, director at Quantum Securities.
Markets are driven more by economic outlook, company earnings, macroeconomic factors and liquidity, Dutt told BloombergQuint. "None of these are impacted by this event", he asserted.
Any major impact due to this would only be political in nature and that too in 2019, he said.
It’s too early to assess the impact on stock markets.Sanjay Dutt, Director, Quantum Securities
No Immediate Impact
Dutt's view was echoed by Hiren Ved of Alchemy Capital Management, who said there will be no immediate impact on the market.
Ved said that Kumar, a "shrewd politician", has taken his first step to distance himself from Lalu Prasad Yadav. However, it will be too early to judge if he will support the BJP going forward, he added.
Kumar's resignation will be a great positive as with him goes away the "last vestige of opposition" for BJP's political and economic agenda, according to Ajay Srivastava of Dimensions Consulting. The sale of public sector units is now certain, he added.
(This article was first published by Bloomberg Quint.)
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