While the Bihar election results will not impact the political stability at the Centre, market participants believes that the poll outcome would definitely influence global investors perception about the government’s ability to carry forward its reform programmes.

The fifth and final phase of polling ended on Nove-mber 5 and the final resu-lts would be announced on November 8, 2015. “The result seems too cl-ose to call, but the impact should be both significant and short-lived. Bihar is important because it hol-ds the fourth highest nu-mber of seats in the Rajya Sabha, the upper house of Parliament. For the reform agenda to be effective, any party will need the support of both the houses of Parliament,” said analysts at Societe Generale (SC), a global investment bank.

If the BJP-led NDA fails to win the Bihar assembly election, SC said that the reform process would ta-ke a little longer and mo-re difficult to achieve. On Thursday, the equity markets fell close to one per cent as cautious investors pared their positions ahe-ad of the announcement of Bihar exit poll results. The sentiments also remained weak amidst weakness in Asian equities after the US Federal Reserve chief Janet Yellen reiterated the possibility of raising interest rates in December. The Sensex ended the day at 26,304.20, down 248.72 points or 0.94 per cent while the Nifty slumped 84.75 points or 1.05 per cent to close at 7,955.45.

According to analysts at Bank of America Merill Lynch (BoAML), Bihar polls are perceived to influence the course of reforms. “They will influence the markets perception about reforms. We continue to advise investors to monitor three event risks, which are Bihar polls, first Fed hike and earnings turnaround,” BoAML said in a note to its clients.

However, more than reforms, it said that a cut in lending rate would stimulate aggregate demand, which will be key to a cyclical recovery.