We spoke to a number of wealth advisors to get a sense of which direction the market is expected to take. Although most of them believe that the benchmark indices — Nifty 50 and BSE Sensex — are overpriced and there could be some correction in store. There is, meanwhile, a speculation of substantial correction ahead in case the BJP-led NDA manages to secure fewer seats than expected.
The excruciating pain could be seen in the small cap stocks and funds, if the result does not come along the lines of expectations, says one veteran equity analyst based in Mumbai.
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“Small cap stocks may fall badly if the BJP secures below 272 seats in the Lok Sabha elections. The benchmark indices — Nifty 50 and BSE Sensex — may also witness some correction but not substantially. However, the large cap rally will continue after the election results because of a number of reasons,” a Mumbai-based equity expert requesting anonymity, said.
Towards the end of the year, RBI may slash the key benchmark rate but it primarily depends on the monsoon. If the monsoon is good, the rate cut may be possible, he added.
“Investors are holding on to cash and they want to wait till the election results. They would rather invest at a higher price point but would not take any decision till the results are out on June 4. Our advice is to not speculate these short-term market movements. Most of the investors are clueless about how the market will react. So, it is better to wait and watch,” said Ravi Saraogi, co-founder of Samasthiti Advisors.
Which way the tide turns
Lok Sabha elections could possibly throw up different scenarios. Based on the outcome, markets would react accordingly. So, how the benchmark indices Nifty50 and BSE Sensex react would be a function of the exact outcome of Lok Sabha polls 2024.
Anirudh Garg, Partner and Head of Research, Invasset, PMS, said, “If there is a strong BJP majority, markets are likely to respond positively, reinforcing existing sentiment. And if there is a weak performance by the ruling party and it fails to secure a decisive majority, it would lead to market uncertainty and short-term volatility.”
“If a non-BJP government comes to power unexpectedly, we could see a market correction similar to 2004 when the Congress formed the government against expectations,” he added.
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Likewise, Ravi Singh, SVP, Retail Research Religare Broking, also said that the impact on benchmark indices will depend on the direction in which the tide turns.
“If the Modi government is able to secure a strong majority, it is expected to trigger a favourable market reaction. If a BJP coalition government with NDA support comes into play, market sentiments might go through a corrective phase, which could make investors sceptical. If the Modi government secures a significant majority, it is possible that the Nifty 50 could achieve 24,200 and the Sensex could reach around 78,500,” said Ravi Singh.
Sarvjeet Singh Virk, Co-founder and MD, Shoonya by Finvasia said, “The results of Lok Sabha polls can have varying effects on financial markets in the immediate future, based on factors such as political stability, policy continuity, and investor sentiment. At present, volatility in the market can be attributed to various unconfirmed news and updates regarding the election result. However, an important ongoing trend during this ambiguous phase is the active retail investors’ participation. This is likely to continue further, reflecting the positive sentiment of investors aligning with their expectation of political stability, post results.”
Eyes on the long-term goal
Most wealth advisors assert that investors are recommended to look at the larger picture instead of getting carried away with these “events”, however significant they might appear.
Saraogi said “Investors should look at their long-term financial goal only and not think too much about the short-term volatility that comes with these events.”
“While election results can have a short-term impact, long-term trends are shaped by broader economic forces, technological advancements, global events, and market fundamentals. In any case, it is crucial to make informed decisions, stay focused on financial goals and respond to actual developments, not speculations. It is essential to craft a solid investment plan, meticulously pick investments, diversify to manage risk, and remain patient during market uncertainty,” added Virk of Shoonya by Finvasia.
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Published: 30 May 2024, 12:41 PM IST
