NEW DELHI: As India enters the election result week and initial exit polls predicting the return of NDA (National Democratic Alliance) to power, analysts feel that market sentiments will remain positive in the coming week.
While stock markets continued their rally in April, by May, many investors had turned cautious ahead of the exit polls, mainly due to uncertainty over the outcome of the elections. But with these polls now predicting Prime Minister Narendra Modi's return to power, the markets have already turned exuberant.
This after the Nifty-500 index was corrected by about 5 per cent from its peak in mid-April. Foreign Institutional Investors, who were strong buyers earlier in the year, have turned net sellers in recent trading sessions; and some domestic mutual funds are sitting with higher-than-usual cash levels.
However, experts say this is only natural, given the past performances of stock markets during the election months.
In 2004, days after the BJP and its allies were defeated, Sensex crashed 842 points as the outcome was against investor expectations. The markets stabilised only after 15 days.
Things were slightly different in 2009, when the UPA (United Progressive Alliance) was expected to come back to power. The markets surged about 17 per cent just two days after the final verdict was out, as it was already in line with investor expectations. Sensex gained at least 24 per cent a month after UPA-II came back to power.
Similarly in 2014, the markets had been expecting the BJP-led NDA coalition to form the government; and soon after the exit polls revealed an outcome in favour of the NDA, BSE Sensex crossed 24,000 points for the first time.
This time, the markets have already factored in the return of NDA.
“Valuations, flows and our investor discussions suggest markets are factoring in a BJP-led NDA win,” analysts at UBS Securities India Pvt Ltd said in a note to clients on May 16.
And now with exit polls already predicting NDA’s return to power, the markets are expected to continue their rally till Thursday, provided there are no spoilers.
“The markets will react positively to the exit poll outcome of NDA winning elections,” said Deven Choksey, managing director of KR Choksey Investment Managers, adding, however, “global issues will continue to be an overhang.”
Meanwhile, the stock exchanges and regulator Securities and Exchange Board of India have beefed up their surveillance mechanism to check any manipulative activities in the market this week in view of high-octane election-related events lined up.
