Stock Market Outlook 2026: Kotak Institutional Equities expects financial markets to take limited comfort from signs of electoral continuity, even as exit polls from key state elections point to a largely stable political landscape. According to the brokerage, while incumbents are projected to retain power in several regions, including Assam and Puducherry, and alliances like the DMK+ and UDF are expected to hold ground in Tamil Nadu and Kerala, respectively, a tight contest in West Bengal and the mixed accuracy of past exit polls could temper investor optimism.
“Markets may continue to debate more on oil versus macro-calculus, while giving a brief cheer for electoral stability. Exit polls suggest a strong BJP performance in recent assembly elections,” the brokerage said.
However, the brokerage also noted that exit polls have had a mixed track record in India recently, with large divergence between actual results and exit polls (notably Lok Sabha elections 2024) and certain pollsters suggesting higher share of voters unwilling to disclose their preferences
Kotak notes that any positive sentiment from political stability is likely to be short-lived, as market focus quickly shifts back to more pressing concerns such as elevated crude oil prices, inflation risks, and broader macroeconomic headwinds. With no major elections due in the near term, the report highlights an opportunity for policymakers to prioritise economic management and reforms, though the evolving macro backdrop remains the key variable for market direction.
The brokerage said that “government enters a relatively election-free corridor of 10 months. We expect the government to firmly focus on managing India’s weakening macro environment, amid elevated crude oil prices, risks to food inflation from a sub-par monsoon and a widening current account deficit.”
Kotak added that it expects policymakers to now focus on rationalizing energy subsidies, accelerating trade diversification, finalising the India-US Bilateral Trade Agreement and accelerating certain slow-moving reforms.
The brokerage said that Indian equities are likely to react positively in the near term if exit polls, particularly the BJP’s projected breakthrough in West Bengal, are validated on May 4, 2026.
However, it also noted that the durability of any rally will be tested quickly, as the trajectory of crude oil remains the single largest short-term risk variable.
“We expect markets to trade in a range, with election enthusiasm fading relatively quickly as attention reverts to earnings delivery, oil price trajectory and its implications for India’s macro and the government’s willingness to undertake difficult but necessary policy adjustments on energy pricing,” the brokerage said.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
