NDA’s landslide Bihar triumph adds strong boost to India’s rebound story, says Motillal OsWal

Domestic brokerage firm Motilal Oswal says the 2025 Bihar Assembly election results are poised to be a new set of stars for Indian equities, with the brokerage calling the NDA’s landslide victory a clear sentiment booster for the markets. The coalition’s victory – 202 seats out of 243, backed by a 46.6% vote share – has surprised even the most optimistic exit polls. What is striking, according to Motilal Oswal, is that this mandate comes despite an emerging opposition challenger, a new political entrant and the opposition of four terms in office. The company believes that the magnitude of the judgment signals a shift in Bihar’s political landscape towards a more development-driven and governance-oriented discourse.

On the markets side, the broker notes that this result strengthens the strength of the ruling coalition at a time when investors have been vigilant about political cohesion after the 2024 general elections. Those concerns, Motilal Oswal points out, were already subsiding after strong NDA performances in Maharashtra, Haryana and Delhi. Now, Bihar’s emphatic verdict adds a new layer of stability, and comes at a time when several supportive macro and policy factors are coming together.

Motilal Oswal points to a series of simultaneous headwinds: continued reforms and growth-oriented measures by the RBI and the government, an improving earnings environment, a policy push to stimulate demand, and a more than year-long period in which Indian equities have underperformed global equities. Nifty is down 1% since September 2024, against a 20% rise in the MSCI EM, alongside sharp FII outflows of $27.7 billion. Against this backdrop, the brokerage believes that Bihar’s result is part of a broader mix that could support a more sustainable upward market trend.

While acknowledging that the socio-economic impact of the mandate will unfold over time, Motilal Oswal says the immediate outcome for investors is continuity of policy direction and greater operational flexibility for the Center and the state, a combination it describes as the ‘dual engine’ framework. The short-term market reaction, the report adds, will eventually give way to the next set of indicators: the sustainability of the GST 2.0-led consumption boost, upcoming RBI actions, macro data and, most importantly, the trajectory of corporate earnings.

On the earnings front, Motilal Oswal notes that the just-concluded 2QFY26 season saw an encouraging improvement. In the coverage universe, profit after tax was 3% above estimates and revenue was 2% higher. The numbers were broad-based: large caps exceeded expectations by 2% and midcaps by 8%, while small caps lagged behind with a miss of 8%. The brokerage said the pick-up in positive surprises could be an early sign of steadier earnings momentum, supported by an improving demand environment on the back of GST 2.0 rate cuts, lower interest rates and tax savings for middle-income consumers. Motilal Oswal reiterates its constructive stance on Indian equities, supported by what he calls improving earnings momentum, reasonable valuations, with the Nifty trading at 21.1 times, only slightly above its long-term average, and a policy environment geared to doing ‘whatever it takes’. With supportive macro indicators and the possibility of a tapering of FII sales, the brokerage views the Bihar mandate as another factor strengthening policy stability and market confidence. According to Motilal Oswal, the NDA’s landslide in Bihar strengthens the government’s ability to maintain its current policy trajectory and adapt it to changing economic imperatives, a continuity that markets are likely to welcome for the time being.

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