Lok Sabha poll outcome: May 13 will be a bigger event than May 16, say analysts

By Kshitij Anand, ECONOMICTIMES.COM | 6 May, 2014, 01.29PM IST 

NEW DELHI: Although May 16, when election results are expected to come out, is supposed to be a very big and important day for the markets, but analysts feel that the big move in the markets may come in from May 13th onwards when the outcome of the exit polls starts trickling in.

"We have moved higher in the past couple of months with benchmark indices gaining over 6 per cent since March 2014. The basis of this euphoria on the street is the result of opinion polls, predicting a BJP-led government. But will the BJP have a clear and absolute majority remains to be seen," say experts. 

The exit poll data could be used as a proxy or foreshadowing of the actual results on May 16th and investors or traders might start taking action early.

"Whatever is the result of the exit polls, it will start impacting the markets from May 13 onwards. It is also possible that there is some privately carried out exit poll information for their private consumption available to some sophisticated investors," said Dr. Vikas V Gupta (Head- Research & Product Development) at ArthVeda. 

The recent run-up seen in benchmark indices confirms 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.

"I agree that 13th May would be a precursor to 16th May Lok Sabha elections results. If the exit poll numbers are in favour of NDA and Narendra Modi, the market will zoom and touch a all-time high on 13th itself," said Rajesh Sharma, Director, Capri Global Capital Limited.

"However, if the numbers reveal the probability of the hung Parliament, then the market will certainly tank by more than 500 points in a day, as the market had been moving up in anticipation of NDA coming to power at the Centre," he added. 

The euphoria ahead of elections results due in mid-May cannot be ruled out in the markets. The Indian markets have got support from strong inflows from foreign institutional investors (FIIs) who are almost certain of a Narendra Modi-led NDA government after the general elections.

Amid hopes of a stable and reform-oriented government after the general elections, foreign investors pumped in Rs 9,600 crore in Indian stocks in April, the eighth consecutive month of inflows, as per latest data. 

Analysts feel the time period between 13th and15th May will be very crucial for the markets and wild swings can be expected on either side. The strong expectations of the BJP-led government and extensive media coverage over exit polls would keep the sentiments positive. However, investors would prefer to hold a certain portion of their liquidity to cover unexpected results.

"Exit poll throws the ball park figure of the next government which the markets would react to immediately. Between 13 and 15th May 2014, the markets would be volatile and react to exit poll results and show a direction going forward," said Siddharth Sedani, Vice President (PMS) at Microsec Capital Ltd.