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General Elections 2019: Market Will Remain Supreme

Market looks for certainty and uniformity in the policies, which is mostly taken as guaranteed if the same government comes back to power. It is always good for the same government to repeat as it helps maintain the continuity as far as basic policies are concerned.

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Even during the time when the election results were trickling in showing a considerable lead for NDA, the stock market reached the psychological level of 40000. In fact, the first day after the exit polls results saw sensex jump over 1400 points.  At that time it was estimated that if the NDA comes back to power then the sensex might cross the psychological level of 40,000, but it crossed the mark much earlier. This shows the confidence market has in the continuation of previous government and hoping the business environment will remain favorable.

Market looks for certainty and uniformity in the policies, which is mostly taken as guaranteed if the same government comes back to power. It is always good for the same government to repeat as it helps maintain the continuity as far as basic policies are concerned.

Foreign institutional investors (FIIs) also remain bullish on repetition of present government mainly due to its initiative to cut red tape. In 2014 too, when the news of Prime Minister Narendra Modi was floating, foreign investors purchased Indian shares worth Rs 31,663 crore.

However, foreign portfolio investments have been lukewarm this year except for marked improvement in the month of March. This has mostly due to uncertainty in the market, less favorable news trickling in, and US-China trade war.

But, anything will be premature to say as the scenario will be clearer only after the final outcome and the formation of the government. Every eye is on the election result as it has been seen historically that the political outcomes produce trends that stay for years.

A sharp movement is expected, but as of now the initial results have brought a little stability to the stock market. This whole week will be worth watching and investors have to be very cautious. If anything goes wrong, then the market may come down to 10000 levels. The traders should take contra bets on either side and the for investors the ideal advise would be to wait till this period is over. In case of panic in the market, one should be ready with the list from the sectors that are reasonable priced such as FMCG, consumption, etc.

Having said that, the market is volatile and any result will not dampen the spirit of the market for long. The cautious approach is likely to be maintained for the next one month at max. BSE Sensex and NSE Nifty recovered from a 9-day losing streak last Wednesday, but the anxiety factor is still there. All in all, Sensex lost 1,977 points since April 26 and NSE Nifty lost over 600 points. All these downward figures should affect the zeal of investors as historically the market bounces back within a period of 3-6 months. So, even if the government changes, the market might decline by 10-15 per cent but the decline will fade away after a brief period of turbulence. It should be kept in mind that the same trends were seen in Lok Sabha elections of 2009 and 2014, often, history repeats itself.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


Rachit Chawla

The author is Founder and CEO, Finway Capital

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