Elections 2026: According to the latest strategy note from Kotak Institutional Equities, the ongoing 2026 assembly elections, especially the tightly contested race in West Bengal, could provide a catalyst for the stock market. 

Stock market may react positively if BJP wins

 If the Bharatiya Janata Party (BJP) secures a victory in West Bengal, the market reaction would likely be in the green. Kotak pointed out 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." 

Coupled with exit polls suggesting incumbents would retain power in Assam, Tamil Nadu, and Puducherry, while West Bengal would see a close contest, this broader political scenario is expected to give the markets a brief reason to cheer, Kotak said, noting that markets may continue to debate more on oil versus macro-calculus.

Crude oil remains a trigger

However, Kotak said that this election-fuelled rally might run out of gas sooner rather than later. The brokerage said 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 the government to firmly focus on managing India's weakening macro environment, amid (1) elevated crude oil prices, (2) risks to food inflation from a sub-par monsoon and (3) a widening current account deficit,” it said.

With no major state elections scheduled until early 2027, the National Democratic Alliance (NDA) enters a 10-month election-free corridor. During this window, Kotak expects policymakers may focus on rationalising energy subsidies, pushing the India-US Bilateral Trade Agreement across the finish line, and accelerating slow-moving reforms.

“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,” Kotak said.

Meanwhile, the brokerage remains positive on corporate growth, projecting the Nifty-50 Index net profits to grow 19.3% in FY2027 and 13.9% in FY2028.