May 15, 2014
Don't expect a 'spectacular rally' on Friday the 16th, say analysts
We have already witnessed a massive spectacular rally of over 1,500 points on the S&P BSE Sensex in a matter of just three trading sessions starting Friday. All the exit polls have unanimously given the BJP-led NDA a seat tally which is near majority of 272 seats, which will enable them to form government and Modi to become India's 14th PM.
Don't expect a 'spectacular rally' on Friday the 16th, say analysts
NEW DELHI: It
may not be official yet, but it looks like the markets are discounting a
scenario where the NDA forms a government with Narendra Modi as a Prime
Minister on Friday, May 16.
We have already witnessed a massive spectacular rally of over 1,500 points on the S&P BSE Sensex in a matter of just three trading sessions starting Friday. All the exit polls have unanimously given the BJP-led NDA a seat tally which is near majority of 272 seats, which will enable them to form government and Modi to become India's 14th PM.
However, the
real picture will be out on May 16 only. The rally is primarily driven on the
hopes of exit polls and these polls have been misleading in the past two
elections, say analysts.
Even if the NDA does come to power but with seats lower than market expectations, we may see some bit of profit booking, say experts. The runaway rally seen so far on the benchmark indices will only extend marginally even if a stable business-friendly government comes to power on May 16, because most of it is already factored in.
Even if the NDA does come to power but with seats lower than market expectations, we may see some bit of profit booking, say experts. The runaway rally seen so far on the benchmark indices will only extend marginally even if a stable business-friendly government comes to power on May 16, because most of it is already factored in.
"Exit
polls have not been completely reliable, as has been evidenced in the past.
However, the overwhelming view is that there would be an NDA-led government at
the Centre and this has already been factored in by the market at the current
levels," said Viswajit Srinivasan, Director - Business Development,
Wholesale Lending, Capri Global Capital Ltd.
"In the
event of a significant difference between the exit poll results and an unstable
government at the Centre, the market would see a big correction. The volatility
would definitely be high and retail investors would be best placed to not enter
till there is clarity on which party is likely to lead the next government
formation," he added.
The recent
run-up seen in benchmark indices is evident from the fact that the markets are
pricing in some probability of the BJP-led NDA government at the Centre. If the
exit poll numbers are in favour of NDA, there is a possibility of a sharp
up-move while a vice-versa situation could be disastrous for the markets, say
analysts.
"It seems
the NDA may form the next government at the Centre. The Nifty around 7100
levels suggests a lot of good news is already factored in. Having said that if
there is a fractured mandate, with the NDA bagging around 220 seats, then the
markets will be in shock," said Raamdeo Agrawal, joint managing director
of Motilal Oswal.
"I think
that NDA will get 225-230 seats as no one's prediction has been below that. So
let's not talk about something which is completely surprising, like the UPA
getting 250-270 seats," he added.
The last three
days saw the Nifty rallying over 100 points and the index is now trading
comfortable over 7000 levels. Experts feel that traders should book some bit of
profits as the rally might not be that strong on Friday.
"I have
been advising my clients now for the last 8 to 10 days, saying that at every
rise it is time to book profits to a certain extent. Investors should look at
liquidating 30% to 35% of their portfolio, especially if they have bought in
the last five or six months," said Ambareesh Baliga, Managing
Partner-Global Wealth Management, Edelweiss Financial Services.
"It is
always prudent to book out to a certain extent, because the best of the news is
already there in the price and assuming that they have a complete majority as
per the exit polls, we can possibly have one more bump up may be of 150-200
points," he added.
But Baliga is
of the view that the pop may not really be worth playing, because in case the
final result is different and negative compared to the exit polls, the downside
could be huge. So it is better to take that bird "It is always prudent to
book out to a certain extent, because the best of the news is already there in
the price and assuming that they have a complete majority as per the exit
polls, we can possibly have one more bump up may be of 150-200 points," he
added.
But Baliga is of the view that the pop may not really be worth playing, because in case the final result is different and negative compared to the exit polls, the downside could be huge. So it is better to take that bird which is in your hand than hoping for two in the bush, he said.
But Baliga is of the view that the pop may not really be worth playing, because in case the final result is different and negative compared to the exit polls, the downside could be huge. So it is better to take that bird which is in your hand than hoping for two in the bush, he said.
