After the Sensex and Nifty rallied on optimism on Narendra Modi's likely return owing to exit poll outcome, should you invest, or wait on the sidelines?
After the Indian stock market spurted on Monday morning following exit polls predicting an easy victory for the Narendra Modi-led government, experts say that the rally is likely to continue if the actual numbers on May 23rd come as expected. Notably, the 30-share Sensex zoomed 1,134 points to hit the day’s high at 39,064.23, while the Nifty raced to hit the 11,700-mark. Among the indices, Nifty Bank index surged over 1,000 points the most since May 2009. Notably, shares of banking majors ICICI Bank, HDFC Bank and Kotak Mahindra Bank surged to fresh record high, surging up to 6 per cent.
Taking stock of the robust rally, investment advisor Sandip Sabharwal noted that the markets saw a gap-up opening today on exit polls prediction, and if these numbers come true, there could be a significant rally in the broader markets. “If this plays out then it will create significant value creation in the broader markets and that is where investors should be focused on,” Sabharwal said in a note to Financial Express Online. Investors who want to be absolutely sure can wait till the final outcome on May 23rd as even if there is some rally there will still be enough more to go, he added.
According to technical analyst Milan Vaishnav, the surge provides an excellent opportunity for investors to take money off the table. “The time to build a portfolio was when the markets corrected a couple of days back and not now. If anyone is entering at current prices, the risk to reward ratio does not favour them,” he explained in a note to Financial Express Online.
According to the expert, the present euphoric reaction might continue and the stock markets may move to fresh record highs, but once this euphoric reaction is done with, macro-economical and macro-technical factors will assume focus. Therefore, investors are better off not chasing this rally and use these up moves to lighten their holds and create room for rebalancing their portfolio once the general election results are fully digested, he added.
In case the BJP manages to form the government on their own, in-line with exit polls, the stock market could surge to lifetime highs. “That would be the best time to start booking profits on your longs while waiting for the right time to re-enter on dips. However if NDA fails to secure a clear majority this Thursday, the markets might see a temporary correction until there is clarity on the next government,” Amit Gupta, Co –Founder and CEO, TradingBells said. It all depends on the final outcome this Thursday, meanwhile traders can enjoy the adrenaline rush provided by the exit polls, he added.