(Bloomberg) -- Wins for Prime Minister Narendra Modi’s party in key state elections is likely to boost India’s appeal for foreign investors and attract more inflows into local equities, according to market participants.

Modi’s victories in three crucial state elections strengthen his party’s position before nationwide polls next year, raising the odds of policy continuity in the world’s fastest growing major economy. Jefferies Financial Group Inc. sees cyclical stocks benefiting the most from the outcome of the polls while Nuvama Wealth Management says it has become more confident about the government’s capital spending.

Indian equities rallied on Monday, with the benchmark NSE Nifty 50 Index climbing as much as 1.7% in early trading.

READ: Modi’s Decisive Win in State Elections Boosts India Sentiment

Foreign investors have bought more than $14 billion worth of Indian shares on a net basis so far this year, after withdrawing a record $17 billion in 2022.

Here’s what market participants are saying:

Gary Dugan, chief investment officer at Dalma Capital Management Ltd.

“Going into this set of state elections, there were some concerns among foreign investors that the BJP would suffer something of a setback, however, that has proven not to be the case.” 

There will be even greater confidence that “Modi will carry the day in the next national elections and that the current market friendly policies of the government will be maintained and built upon.” 

“We see the Sensex pushing to new highs” due to factors such as “good political backdrop, hopes for lower global interest rates.”

Matthew Haupt, portfolio manager at Wilson Asset Management

“What it does do is give investors increased confidence and duration to the India trade and will likely see continued capital inflows to India.”

Jefferies’ strategists including Mahesh Nandurkar 

Modi’s party winning three crucial state elections, exceeding exit polls’ predictions, may boost investor sentiment for domestic cyclical stocks including banks, industrial and power.

It also “reinforces the consensus expectations of a Modi win 2024 national elections with a greater likelihood of 300+ seats for the BJP.”

Deven Choksey, managing director of DRChoksey FinServ Pvt. 

“The results show that India’s hinterland is asking for convincing policies for growth and the market will attract a lot of money in the coming months.”

Global investors will now become even “more comfortable with India allocation ahead of elections.”

Prashanth Tapse, analyst, Mumbai-based Mehta Securities Ltd.

“A stable political environment could further boost investors’ confidence and drive the markets higher, with the possibility of benchmark Nifty attaining 20500-20800 levels going ahead appears bright.” 

Kapil Gupta, an economist at Nuvama 

“This lessens the risk of a populist turn and bodes well for continued government capex. Markets are likely to cheer the electoral outcome for now as it abates political risk.”

--With assistance from Ishika Mookerjee.

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