The Economic Times daily newspaper is available online now.

    D-Street experts say Monday’s rally just the beginning if exit poll results hold true

    Synopsis

    According to Deven Choksey NDA-II will speed up economic progress in the country.

    Sensex-BCCL-1200
    Polls are also predicting clean sweep by the NDA in several key states.
    Mumbai: Market participants were upbeat on the prospects of the equity market after the exit poll results showed that Prime Minister Narendra Modi-led National Democratic Alliance (NDA) was likely to win with a majority when results are announced on May 23.

    Almost all exit polls, including Times NOW-VMR, Republic-CVoter, India Today and News Nation exit polls, have given clear majority to the BJP-led NDA with seats nearly or above 300, out of total 542 Lok Sabha seats.

    Polls are also predicting clean sweep by the NDA in several key states, including Uttar Pradesh, Bihar Maharashtra and Madhya Pradesh.

    In reaction, BSE Sensex jumped over 1300 points on Monday, while Nifty reclaime the 11,800 level.

    “We see May 23 as a binary event and a decisive majority for the current government (NDA) would be viewed as the better outcome,” Jefferies said in a note.

    “We expect a strong post-election rally if the current government returns, as the election has been an overhang,” they said in an note on industrials, adding that while industrial companies’ execution and order flow have improved, but 2019 has not seen the pre-election rally of 2014.

    They also pointed that defence, roads and renewable energy saw a pick-up in announcements and execution post 2014 elections.

    The sentiment was upbeat across the board.

    “The exit poll results would mean a positive market for the next few sessions. FIIs would also start to look at India constructively. Of course, it is a statistical study at the end of it. However, what it shows is that there is a clear trend,” said Vaibhav Sanghavi, Co-CEO at Avendus Capital Public Markets Alternative Strategies.

    Gautam Chhaochharia, Managing Director and Head of Research at UBS Securities, India, believes market may see an upside of 5-10 per cent from Friday’s levels, given the exit poll results.

    “Exit poll results are positive for market sentiment. These are of course, the exit poll results and not the actual poll results. Some people will have on the back of their mind, as to what happened in 2004 and what happened in Australia last week,” says Gautam Chhaochharia, Managing Director and Head of Research at UBS Securities, India.

    “In general across exit polls, vote shares have gone up, contrary to market expectations of them going down. Most of the exit polls are also predicting a BJP single-party majority, which if happens, is clearly a big positive for the market,” he added.

    According to Chhaochharia, as far as fundamentals and risk rewards are concerned, and considering the fiscal/growth challenges that exist, it may not be the best time to get into the market.

    “But, obviously if the exit polls are replicated in actual results on May 23, the markets will have a leg up, and may see a 5-10 per cent upside from Friday’s levels,” he added.

    According to Deven Choksey, group managing director, KR Choksey Investment Managers, NDA-II will speed up economic progress.

    Choksey expects large growth from agricultural, industrial, infrastructure sectors, and said the consumption boom from rural India will drive FMCG, Auto stocks.

    “Beaten down stocks in financials, insurance are my favorite. Post May 23, market would focus back on the global macros and implications on commodities and currencies,” Choksey said.

    According to Motilal Oswal analysts the prediction of continuance of stable government with majority/near majority augurs well from reforms and policy agenda perspective.

    “It removes a key overhang from the market narrative – potential of a hung verdict, formation of a third front government with no major national party at the helm etc,” Motilal Oswal analysts said, adding that this would be the first instance when Congress would have failed to cross triple-digit seats for two national elections in a row.

    JM Financial pointed out that this would be the first time in last 30 years, when a majority government is likely to return with a majority in its second term as well.

    “The short-term reaction on various markets are probably easier to predict, while the impact on the real economy and hence, the medium and long-term impact on markets that much harder given the ongoing domestic (rural, SME, real estate stress) and global (US-China trade war) issues,” JM analysts said.

    “In the very short-term, we expect a short fall in yields, currency to strengthen and equity markets to resume the rally. The expectation of rate cut will strengthen and RBI could also step up on liquidity measures, if the final results on May 23 are on the lines of the exit poll results,” JM analysts added.

    Not everyone was euphoric though.

    “This was partly discounted in the market over the last few days. The street would like it even more if the BJP on its own gets a majority in the Lok Sabha. However going by the way exit polls in the last two elections were off the mark from the actual numbers, the markets would get excited but not super excited,” said Deepak Jasani, Head of Retail Research, HDFC securities.

    “The fact that NDA may be able to attain majority in Rajya Sabha only in 2020 or 2021 is a minor dampener as major reforms would need passage in both houses,” added Jasani.

    There were also concerns on the weak economic scenario, which was likely to persist even if NDA comes to power.

    “If the NDA returns to power, we do not foresee a major reversal of the current (weak) economic conditions in the short-term, although the end of political uncertainty and policy continuity would be a medium-term positive,” Nomura economists said in a note.



    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more


    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
    The Economic Times

    Stories you might be interested in