Exit poll impact Nifty: Nifty bulls chant ‘Abki baar 24,000 paar’ after exit poll predicts Modi 3.0.
If the June 4 election results also turn out to be in favor of the street favorite BJP, analysts expect the Nifty to soar to 24,000 in the coming days. The headline index ended the week down nearly 2% at 22,531 as FIIs preferred to play it safe over D-Day.
With exit poll results now indicating a clear victory for the NDA alliance with over 350 seats, analysts said this would be an opportunity for bulls to trigger a big rally in the markets on Monday.
“Large-cap stocks in the financials, capital goods, automotive and telecom sectors are likely to lead the rally. The strength will be further fueled by better-than-expected GDP growth of 8.2% after the close on Friday. Technically and fundamentally, the market is expected to rally. We are preparing,” said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Analysts believe that the current market volatility will subside on Monday and the focus will shift to the most likely outcome where the BJP will emerge as the single largest party with a stable government and policy continuity along with new reforms. Exit poll forecasts suggest the NDA alliance could end up with 350-370 seats, enough to form a third government and in line with mid-term forecasts ahead of the exit polls. However, this figure is almost the same as the 2019 figure and falls short of the Alliance’s target of 400+.” The final number of seats on June 4 may be slightly different. Unless there are surprises in the exit poll forecasts from both alliances, Indian markets may not react much to these numbers. In any case, feelings of disappointment or euphoria may subside within a few days, after which the focus can shift to the next. “There will be policy announcements in the first 100 days of the new government,” said Dhiraj Relli, MD and CEO, HDFC Securities. Once the euphoria subsides in the coming days, the market may see some gains from ‘buying and selling on rumours’. Divam Sharma, founder and fund manager at Green Portfolio, says:
Prime Minister Narendra Modi and Home Minister Amit Shah predicted that the markets would hit new highs after the BJP’s victory.
Sharekhan expects that Modi 3.0 will see major structural reforms, but the extent will depend on the number of seats won. “As we set out the roadmap for Viksit Bharat 2047, we expect major policy reforms on Ease of Doing Business to attract FDI investments and upgrade the country’s rating, along with other measures related to global bond indices and judicial reforms. The inclusion will drive more inflows into government securities, Uniform Civil Code, Land Bill, Simplified Tax Code and more products in the GST space,” Sharekhan said.
Also read | What are Modi stocks and should you buy them before the election results? Here’s the full list:
With a possible unanimous result from the current BJP-led government, the brokerage expects domestic cyclical sectors such as infrastructure, industrials, defence, capital goods and automobiles to continue to be major beneficiaries.
In the short term, small-cap and mid-cap stocks may outperform large-cap stocks, led by domestic cyclical sectors and PSUs, over the next two weeks after the election results. Ahead of the 2024-25 consolidated budget (scheduled to be announced in the first week of July 2024), there may be a possibility of profit incorporation due to concerns about tax reform while industries such as pharmaceuticals and FMCG are lagging behind. Sharekhan said IT will perform better.
While the final results may differ from exit poll results, political continuity is likely to be good for risk assets in the short term and good for macro stability in the medium term.
Emkay Global said that from a policy perspective, it expects the reform-led targeted spending agenda to continue, while the healthy macro balance sheets of all economic players in India bode well for a higher trend growth path.
“Once the election event risk is over, all eyes will be on the July Budget to continue the consolidation process while improving the budget internals. We see twin deficits improving further in the coming days, which could further reduce external shocks to India through finance. “It’s a channel in case the global cycle reverses,” said Madhavi Arora, chief economist at Emkay Global Financial Services.
If the BJP alone wins more than 290 seats and the NDA wins more than 340 seats, Bernstein analysts estimate there will be an immediate market rally with high single-digit or low double-digit returns for the Nifty this year.
Also Read: Exit polls show Advantage BJP! D-Street is likely to focus its efforts in these areas.
