If NDA gets between 240-271, the markets would be disappointed, if it gets between 271-292 it would be broadly neutral to positive for markets and if NDA gets more than 291, then it would be seen as  significantly positive by markets

Exit polls released by several media predict a clear mandate for the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government. The NDA is predicted to win between 249-340 seats (mean: 285) of the 543 seats in the lower house (272 seats are required to form a simple majority), while the ruling Congress-led United Progressive Alliance (UPA) government is predicted to win between 70-148 seats (mean: 105). If the exit polls are right, then a majority for the NDA government will be taken very positively by the markets, says Nomura in a research note.

"Notwithstanding a possible knee-jerk market reaction on 16th May, the exit polls confirm and strengthen our baseline expectation of a stable NDA-led government, which is a positive outcome, in our view. This, along with a gradual improvement in the growth outlook in 2015, a credible central bank and easing macro-imbalances bode well for India’s medium-term economic prospects. We expect real GDP growth to rise to 5.0% in FY15 and further to 5.7% in FY16 from 4.7% y-o-y in FY14," the research note added.

However, Nomura said while viewing current exit polls it is important to highlight that both the opinion and exit polls misjudged final results in 2004 and 2009. In 2004, both opinion and exit polls were predicting an NDA win, and while the exit polls were able to capture the loss of momentum for the NDA, none of the agencies were able to predict what turned out to be a convincing Congress-led UPA victory. In 2009, both opinion and exit polls did predict an UPA plurality, but they were mostly pointing to a hung parliament, whereas the actual results showed an almost clean verdict for the the UPA government.

According to the 2014 exit polls, among the swing states, the BJP is predicted to win 45-54 out of 80 seats in Uttar Pradesh as against 10 in 2009 and 19-28 out of the 40 seats compared with 12 in 2009 in Bihar. Among the regional parties, All India Anna Dravida Munnetra Kazhagam (AIADMK)-led by J Jayalalitha and the All India Trinamool Congress (AITMC) led by Mamata Banerjee in West Bengal are likely to emerge strong.

Nomura said, with all due respect to the pollsters concerned, the wide range between the lowest and highest forecasts (i.e., about 90 seats) confirms, in its view, as proved to be the case in 2004 and 2009, that the exit polls should be treated with some caution.

Consistent with this, Nomura sees three main scenarios, like...

1. The NDA secures a solid plurality of between 240 and 271 seats: given the significantly higher forecasts offered by some pollsters, an outcome in this range is likely to prove something of a disappointment to markets. It would, nevertheless, represent a solid plurality, in our view (and be a better outcome for the NDA than what the majority of pre-election opinion polls were predicting). It would require the NDA to enter into negotiations with a number of smaller parties to form a solid (i.e., around 300 seats) majority government. Although the NDA would be in a sound position to do this, such negotiations would likely be noisy and involve some trade-offs on both substance and

ministerial portfolios.

2. The NDA secures a slim majority, i.e., 272-290 seats: we think that markets would likely see this (mid-range, relative to exit polls) outcome as broadly neutral to positive, since the NDA would likely still look to bring in one or more smaller party to ensure greater stability (given the somewhat fractious nature of the current coalition). However, it would be in a strong position to negotiate and we believe that the resultant government would be driven largely by an NDA determined agenda.

3. The NDA secures over 290 seats: we think that in these circumstances, the NDA would probably opt not to bring other parties into the coalition (with the option of doing so downstream if, at a later stage in the parliamentary term, there were defectors from its ranks). This would be seen as a significant positive by markets, in our view, as it should bolster Mr Modi's command over the coalition partners and over dissident elements within the BJP.

Nomura says the exit polls confirm and strengthen its baseline expectation of a stable NDA-led government, which is a positive outcome. "We believe that India's medium-term outlook is likely to gradually turn positive. With growth bottoming out, increased credibility of the Reserve Bank of India (RBI) and faster execution cycle likely post elections, we believe that India's growth mix will change away from consumption towards investment and macro-imbalances will gradually correct. This increased macro stability indicates that the economy is at an inflection point. We expect real GDP growth to rise to 5.0% in FY15 and further to 5.7% in FY16 from 4.7% y-o-y in FY14," it concluded.