Zhao Yaoting, a global market strategist in the Asia-Pacific region (excluding Japan) of JP Morgan, shared his views on the outcome of the Indian elections. He stated that high valuation stocks may face some risks as investors wait for clearer governance factors. The forward price-earnings ratio of the Nifty is still around 19 times, which is at the 85th percentile and one standard deviation of the average level of the past 18 years. Although Indian stocks are currently considered overvalued, they may continue to rise. The recent rally has been broad-based, with mid-cap and small-cap companies reaching record highs relative to the Nifty index. Given the recent political results, there may be fluctuations in the short term. However, domestic investors may take advantage of the current situation to buy at lower levels, while foreign investors looking for more attractive entry points may also find it a suitable time. He mentioned that following the announcement of the election results in India, the ruling party, the Bharatiya Janata Party (BJP), not only did they fail to achieve the overwhelming victory anticipated by many, they also lost the absolute majority in parliament, leading to a 6% decline in the Nifty index. Despite strong performances in pre-election polls and misleading exit polls, the BJP, instead of the expected 303 seats, only won 240 seats in the parliament in 2019. However, the political alliance led by the BJP, the National Democratic Alliance, still won over 290 seats, surpassing the majority of 272 seats required. This once again highlights the potential for error in election polls and the possibility of overestimating trends. He believed that with the election results finalized, voters have expressed their opinions by reducing the political capital of the BJP by nearly 60 seats. The key question for the market now is what this loss of seats means for policy continuity. He also mentioned that the economic reforms carried out earlier to promote macroeconomic stability can remain on track, and the focus in the next five years will be on implementing and executing these reforms without any significant policy shifts. He believed that the new coalition government is unlikely to make drastic changes to the macroeconomic stability measures promised by the current government. After winning an absolute majority for two consecutive terms, the BJP will now have to rely on new allies from Andhra Pradesh and Bihar to secure the majority in parliament. This new coalition government may face challenges in policy coordination rather than policy itself. Despite uncertainties in government and cabinet formation, he believed that the majority held by the new National Democratic Alliance government still gives them a stable position. Looking ahead, the market will be focusing on the RBI policy decision on June 7th (with the market expecting the status quo to be maintained), the government budget to be announced in the following week, and the corporate earnings season starting in mid-July. From an investment perspective, the election results have raised questions among investors about the relative earnings yield of Indian stocks compared to the yield on Indian 10-year bonds, with some preferring Indian bonds. Due to the stable government and predictable policies, the yield spread of Indian bonds relative to US bonds is at a 20-year low. Despite some impact from the election polls, he believed that the election results would not disrupt this balance. Although the Indian rupee may face depreciation pressures, this is primarily due to the uncertainty surrounding the future path of the US Federal Reserve rather than lack of confidence in the Indian economy. In addition, both Bloomberg and JPMorgan bond indices will include multiple Indian bonds this year, which will attract passive fund inflows into the Indian bond market and draw more attention from foreign investors.