It is no doubt going to be an interesting session for the markets on Monday, June 3 ….the first trading day after the Exit Poll results were made public and the day before the actual election results are announced. The exit polls have no doubt instilled confidence amongst investors but the question is will markets scale new highs or investors would look at booking profit in the near term? There is also a camp that believes it could be a mix of both- the markets may move up in the first half and even see new all-time highs and then see profitbooking.
Manish Chowdhury, Head of Research at StoxBox believes that “the exit poll outcome will have a positive impact on the markets on Monday.” However, “we may see some ‘sell-on-raise’ patterns due to sudden spikes for profit booking attempts,” said Prashanth Tapse, Senior Vice President of Research at Mehta Equities. Again, long-term investors should continue to remain invested in the markets as the country’s economic growth continued to remain strong over several quarters, resulting in improved fundamentals, said market participants.
“With the actual election outcome mostly a tail risk now, we would not be surprised to see the return of FII flows into the markets which would further aid the strong domestic participation, said Chowdhary of Stoxbox.
Also, along with exit polls, there are other factors to trigger markets toward a positive trend like short covering, stronger domestic Q4 GDP numbers, early rainfall expectations, lower crude, rally in US markets, and easing of the geopolitical situation.
“With this clear verdict, markets will heave a sigh of relief, in our view, and go back to fundamentals/business-as-usual mode,” said Motilal Oswal Financial Services.
On the day of the election results, both the indices – Sensex and Nifty – could experience substantial movements, with both high and declines remaining on the cards, said investors. “We cannot rule out the possibility of profit booking in the second half of the trading session following an initial upward movement,” said Arvinder Singh Nanda, Senior Vice President at Master Capital Services.
That said, volatility may continue in the near term. The sharp rise in volatility in April and May is indicative of the sense of uncertainty reigning in the minds of the market players. The VIX touched its new 52-week high last week and remained above the level of 24 throughout the last week of May.
However, the victory of PM Modi/BJP augurs well for the economy and capital markets as it provides stability and continuity in policymaking with a single-party majority government, which will be expected to continue pushing its economic agenda, said Motilal.
This verdict and consequent political stability and continuity in policy-making will act like an icing on the cake and keep India as the cynosure of all eyes, in our view.