The Delhi assembly election on Saturday is expected to be a tight contest between Arvind Kejriwal’s Aam Aadmi Party and the BJP. The too-close-to-call election has created uncertainty among investors and has unnerved stock markets.

The possibility of an AAP win is giving investors the jitters right now, analysts say. “It’s the worst nightmare if a government with a socialist agenda comes to power in the capital,” said market analyst Hemindra Hazari comparing Mr Kejriwal’s AAP with Greece’s hard left Syriza party, which has emerged victorious in the recently-held elections.

The Syriza-led government in Greece is opposed to budget cuts and other austerity measures and its tough stand has left global stock markets in turmoil. Syriza’s victory also threatens to shake up the politics in the European Union, where eight general elections are due this year.

“Its (AAP) earlier policies have been anti-corporate,” Mr Hazari told NDTV, saying he worries that if Delhi endorses AAP’s policies it will give a boost to other socialist parties and “this is not what markets like to hear.”

AAP’s policies such as more subsidy on power and water and its opposition to some reforms such as foreign direct investment in retail, have struck a sour note with investors, analysts say. As Delhi’s Chief Minister for 49 days, Mr Kejriwal had ordered the state auditor to look into the accounts of power distribution companies to see if they were profiteering; he had also threatened to cancel the licences of Delhi’s two electricity distributors over power supply issues.

“Last time, power companies had a massive problem when AAP came to power,” said Avinnash Gorakssakar of

Mr Gorakssakar is among those who contend that anti-AAP sentiments have contributed to the recent dip in stock markets; the Sensex is down nearly 700 points or 2.5 per cent in the previous four sessions, coinciding with opinion polls that have predicted that AAP could win.

“Yesterday, we saw markets going up, but supply pressure seemed to come up on higher side. Markets will continue to trade with a negative bias in the near term till the time the BJP gets a decisive victory,” the analyst said.

Others see the downward move as consolidation, normal movements following sharp rallies. But there seems to be a consensus that domestic markets will face headwinds if AAP emerges victorious in Delhi on February 10, when votes are scheduled to be counted.

“We think the market is likely to see a correction of around 5 per cent over next 2 months on account of supply of paper, rich valuations and weak earnings. A loss in Delhi polls for the BJP could further provide an excuse for the correction,” said Bank of America Merrill Lynch’s Jyotivardhan Jaipuria In a report dated February 4.

“The market would be concerned whether the election result is a local issue (as state elections generally are) or whether it indicates some loss of popularity for the ruling BJP,” Mr Jaipuria said.