NEW DELHI — 

Indian Prime Minister Narendra Modi's Bharatiya Janata Party won a landslide victory in the politically crucial northern state of Uttar Pradesh, giving the Indian leader a huge boost half way through his term.

The country’s most populous state, where the BJP swept away the ruling regional Samajwadi Party, was the biggest electoral prize of the five states which went to the polls in recent weeks.

"I give my heartfelt thanks to the people of Uttar Pradesh. This is a historic victory for the BJP; a victory for development and good governance," Modi said.

Modi personally led his party’s campaign in Uttar Pradesh, promising growth and defending his controversial ban on high value currency notes, which many had feared would alienate poor voters in an impoverished state.

But in a ringing endorsement of the Indian leader, the BJP won the biggest victory secured by any party in recent decades in the battleground state. According to the Election Commission, it was ahead in more than 320 seats in the 403-member state assembly.

BJP’s chief strategist in the polls, Amit Shah, attributed the huge win to Modi’s pro-poor policies and the “politics of performance.” Calling it a historic mandate, he said that “The country’s poor people have put their faith in a big way in Mr. Modi.”

Party workers held raucous celebrations outside the party office in New Delhi and Uttar Pradesh’s capital, Lucknow, setting off fire crackers and dancing.

Political analysts said the resounding victory in Uttar Pradesh puts the BJP in a commanding position ahead of the 2019 general elections and enhances Modi’s reputation as a strong leader who can make politically risky decisions.

David Fuller's view

I have long maintained that Narendra Modi was easily one of the world’s most astute and successful political leaders.  He needs to be because he also has the most difficult job within any democracy, in leading India’s huge, promising but also chaotic and diverse culture.

India has been a GDP growth leader since Modi’s landslide election victory two and a half years ago.  Were he to comfortably win a second five-year term in 2019, possible but probably a best-case scenario, India’s rapid economic development would continue.

Subject to Modi remaining in power following the next general election, India would most likely remain a competitive stock market more often than not.  The Mumbai Sensex Index (monthly 20-years & weekly 5-years) is temporarily overextended and near the upper side of its 2.3-year range since the first test of 30,000.  As stock markets enter their less favourable, on average, periods of 2Q and 3Q, the Sensex Index could see a pullback as its uptrend since December 2016 has been gradually losing momentum since February 2017. You can see this in the widening trading ranges on the weekly chart, indicating that demand dominance is waning. 

Buffett-style long-term investors would tend to buy India on setbacks, not least as its valuations are somewhat high (p/e 21.47 & yield 1.44%) and volatility is a frequent characteristic.  I would tend to view future setbacks as of no more than medium-term (a few months) significance, provided the late 2016 lows are not taken out.  That could lead to an even better buying opportunity at somewhat lower levels.