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Stock market strategy for exit polls: What long-term and short-term investors should do now

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Updated: May 17, 2019 4:27:16 PM

Even as stock market awaits election results next week, investment advisor Sandip Sabharwal says that if the exit polls over the weekend indicate that NDA can get a seat tally of more than 280, we will see a significant rally.

Promoter pledging activity in BSE 200 drops in March quarterWhile currently, many stocks might be looking cheap and the overall market maybe looking undervalued, there could be a significant sell-off in case of an unstable government.

Even as stock market awaits election results next week, investment advisor Sandip Sabharwal says that if the exit polls over the weekend indicate that NDA can get a seat tally of more than 280, we will see a significant rally. However, if the exit polls indicate that the NDA will be unable to garner majority, investors should brace for a short-term correction. So what should short and long-term investors do now? According to the expert, long-term investors would do well to ignore the outcome of exit polls on Sunday. “These investors having up to 3 years horizon, can continue to make money by buying a good company at the right price irrespective of who is at the centre,” Sabharwal said in a Youtube video. However, if the long-term investors have borrowed to invest, then this event will be relevant for them, he added. Further, he adivsed against holding leverage, going in to the poll week. Although the global markets could be calm in the near-term, there could be heightened volatility.

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While currently, many stocks might be looking cheap and the overall market maybe looking undervalued, there could be a significant sell-off in case of an unstable government, said Sabharwal.  Accordingly, he advises short-term investors to exit their positions going into the election week. “Maybe, hold cash and wait on the sidelines,” he added. 

Notably, since the overall outcome is very uncertain, traders would do well to go in with no position at all, he explains. If the exit polls indicate that NDA seats are hovering around 240-250, we could see the markets take it extremely negatively, he said. “Only the cash you hold is real, while the outcome of this event is uncertain,” cautioned Sabharwal.

Meanwhile, the Sensex and Nifty extended gains in the afternoon trade on Friday, ahead of exit polls in weekend. The Sensex ended 538 points up to 37,930.77, while the Nifty closed above the 11,400-mark. Bajaj Finance shares ended 6.1% higher at Rs 3,301 while Heromotocorp shares ended 4.6% higher at Rs 2,632, to emerge among the biggest Sensex gainers.

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