BJP’s Delhi Victory Boosts Market Sentiment, FII Inflows May Rise
BJP’s Victory in Delhi: A Sentimental Boost for Markets Amid Global Uncertainty
The Indian stock markets opened under significant selling pressure on Monday, despite the Bharatiya Janata Party’s (BJP) decisive win in the Delhi Assembly Elections. Investors remained cautious as U.S. tariff threats on metal imports, particularly steel and aluminum, raised fears of excess supply being dumped into markets like India. However, brokerage firm JM Financial believes that BJP’s victory in Delhi could act as a sentimental booster for Indian equities, potentially attracting foreign institutional investor (FII) inflows.
BJP’s Resounding Win in Delhi
The BJP secured a landslide victory, winning 48 out of the 70 assembly seats in Delhi, largely driven by anti-incumbency sentiments against the Aam Aadmi Party (AAP). Exit polls had predicted a BJP win, but the actual results exceeded expectations. The AAP managed to secure only 22 seats, while the Congress party failed to win any. BJP’s vote share improved to 45.6%, while AAP’s vote share declined.
JM Financial noted that this strong mandate, combined with BJP’s comfortable wins in Haryana and Maharashtra, has helped ease concerns stemming from the lower-than-expected performance in the 2024 General Elections. This could have a positive impact on market sentiment, providing a much-needed boost to investor confidence.
Stock Market Performance Amid Selling Pressure
Despite the election results, the Indian stock market witnessed heavy selling pressure on Monday. The BSE Sensex plunged by more than 750 points (0.97%), closing at 77,106.89, while the NSE Nifty50 dropped by 228 points (0.96%), settling at 23,316.30. Midcap and smallcap indices were hit even harder, both declining by approximately 2%.
Provisional data from the NSE indicated that foreign portfolio investors (FPIs) were net sellers of ₹470.39 crore worth of domestic stocks on Friday. The total FPI outflow stood at ₹7,342 crore for the first week of February, with a cumulative outflow of ₹85,369 crore in 2025 so far. Meanwhile, domestic institutional investors (DIIs) remained net buyers, purchasing stocks worth ₹454.20 crore.
Will BJP’s Victory Attract FII Flows?
JM Financial maintains that the BJP’s landslide victory in Delhi could serve as a trigger to attract foreign investments. However, the likelihood of significant FII inflows remains uncertain due to the continued depreciation of the Indian rupee, which is hovering near an all-time low of ₹88 per U.S. dollar. A weaker rupee makes Indian assets less attractive to global investors, which may deter fresh FII inflows despite the political stability signaled by BJP’s win.
Sectoral Outlook: Motilal Oswal’s Take
Another leading brokerage firm, Motilal Oswal, remains optimistic about certain consumption-driven sectors following the proposed rate cuts. The firm believes that segments such as discretionary retail, jewelry, hotels, apparel, two-wheelers (2W), entry-level four-wheelers (4W), and capital markets could benefit from improved liquidity conditions.
Motilal Oswal maintains an ‘overweight’ stance on key sectors including consumption, IT, banking & financial services (BFSI), industrials, healthcare, and real estate. On the other hand, it remains ‘underweight’ on sectors such as oil & gas, cement, and metals due to global uncertainties.
Top Stock Picks by Motilal Oswal
From the large-cap category, its top stock recommendations include:
- Titan, Mahindra & Mahindra (M&M), Maruti Suzuki, ICICI Bank, State Bank of India (SBI), HCL Tech, Bharti Airtel, L&T, Sun Pharma, Trent, Hindustan Unilever (HUL), and Dixon Technologies.
In the mid & small-cap segment, it prefers:
- Indian Hotels, Page Industries, Cummins India, BSE, Godrej Properties, Coforge, Metro Brands, IPCA Labs, Angel One, and JSW Infrastructure.
Conclusion
While BJP’s decisive victory in Delhi has provided a sentimental boost to the Indian markets, external factors such as U.S. tariff threats, the depreciation of the rupee, and persistent FPI outflows continue to weigh on investor sentiment. However, domestic institutions remain bullish, and select sectors like consumption and IT are poised to benefit from favorable policy changes. Investors will now keenly watch global developments and policy actions to gauge the market’s next move.
