Stock Market Today: As India moves into the last phases of the Lok Sabha elections, the volatility in the markets remains high, as reflected in the movement of the benchmark indices. The BSE Sensex, despite hitting the $5 trillion market cap milestone recently, is at around 74,115 levels, at least 1,000 points lower than the all-time high of 75124.28 seen on April 9, 2024. The Nifty50 index is trading at close to 22,550 levels, at least 200 points lower compared to the all-time high of 22,794.70 seen in April. Now, it will be the election results that could influence the market movement significantly, say experts.
The number of seats to guide market sentiments
Deepak Jasani, Head of Retail Research at HDFC Securities, said that while the market has factored in a victory for the ruling Bharatiya Janata Party-led National Democratic Alliance (NDA) and Prime Minister Narendra Modi-led government retaining power, it is the number of seats the ruling party gets that will make the difference. If the seats are lower than those secured in the last elections, the markets may take it negatively. If the BJP is able to add seats to its previous tally, it will be better, and if its overall tally crosses the 400-seat mark, it will be positive for the markets.
Sunil Damania, Chief Investment Officer of MojoPMS, echoed a similar view. “The prevailing expectation is that the BJP will achieve a majority; the primary debate concerns how this majority will compare to their previous performance,” he observed.
In February, Prime Minister Modi asserted in Parliament that the BJP would secure 370 seats and the NDA would obtain 400 seats, Damania noted. This projection has set a benchmark for investors. Consequently, market disappointment is likely if the BJP falls short of PM Modi’s forecast. Conversely, should the BJP exceed 370 seats, the market is expected to react positively, albeit briefly, as attention will quickly shift to budget expectations and potential adjustments to capital gains tax.
It is worth noting that following the 2019 election, the market declined for three months despite the BJP winning more seats than in 2014.
How to play the markets
The investors need to take a call on the number of seats the ruling party will be able to secure. They should book profits if they are not confident, said Jasani. They can also use derivative strategies and buy put option.
The base case scenario is the return of the NDA and the BJP to power, which can trigger a rally in markets, said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services. Those who are optimistic about political stability can buy ahead of election results, Vijayakumar added.
Technicals and levels to be followed
According to Rahul Ghose, CEO of Hedged.in, if the initial knee-jerk reaction is on the upside beyond 23,500 on the Nifty after the election results, then the trajectory may continue on the upside beyond 24,200. If the knee-jerk reaction does not take the Nifty to 23,500, then we expect markets to fall back below the 23,000 levels, Ghose stated.
The second half of the year, like the May series, would see continued volatility. Either trading hedged strategies or being stock specific is the way to be, Ghose said, adding that he sees upside in counters such as Hindustan Unilever, Zomato, and IRCTC to name a few.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 22 May 2024, 04:50 PM IST
