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CLSA has said the weakness on Modi's Bihar loss would be a buying opportunity.
Exit polls by various agencies have suggested a close race with a slight advantage for the anti-Modi Grand Alliance.
The coalition of local parties led by Chief Minister Nitish Kumar is expected to win 124 out of 243 seats in Bihar's Assembly, giving them a majority, according to a simple average of the exit polls calculated by Reuters.
If the BJP-led alliance loses, this will lead to more press hype that Modi's honeymoon is over and that his reforms are failing, the brokerage added.
"Investors should view this as short term noise and use any significant weakness as a buying opportunity even though it is also true that the current continuing earnings season has so far been relatively disappointing," analyst Christopher Wood has said.
CLSA added that consensus has cut India's FY16 earnings estimates by 1 per cent since the beginning of the results season and 3.5 per cent over the past three months to October.
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