AAP may decimate Congress, no big moves seen on Sensex: Credit Suisse

Leading global financial services company Credit Suisse says the rise of Aam Aadmi Party is likely to impact Congress more than the BJP.

"One common concern among investors seems to be that the rise of the AAP is likely to strongly dent the BJP's resurgence. We, however, believe that the AAP may decimate the Congress and actually work in favour of the BJP," the Zurich-based firm said in a report today.

"This is because with no linguistic, geographic, caste or religious focus, in its appeal the AAP is similar to the Congress," the report says.

Explaining the above, it says: "While the December 2013 state election results are in no way representative of the whole country, they show that Congress vote share picked up in MP and Chhattisgarh, and though their vote share dropped 3% in Rajasthan, more people voted for the Congress in 2013 than in 2008. This doesn't look like an anti-Congress wave," the report says.

"The wave only manifested itself in Delhi where a credible alternative (AAP) was present. For voters who do not want to vote for the BJP, and thus choose the Congress, the AAP is a reasonable alternative ... If the AAP's impact is smaller than in Delhi, and they swing only 5% of the votes, 39 seats will get affected. Thus, as the AAP eats into the Congress votes, the BJP may benefit from the fragmentation."

On the stock markets, Credit Suisse says, "recent investor interactions suggest a surprisingly widely held view of a plus 20%/minus 20% market swing on the day of the election results."

"We believe for +20% market move one alliance must win 220-plus seats and form a government with 3–4 other parties. For a 20% fall none of the leading two alliances should get even 160 seats. Both these scenarios are unlikely. Vote swings for the BJP are unlikely to be less than 5% (23% share), or more than 25% (28%)."