Market voices post election outcome

Tanvee Gupta Jain, Chief Economist at UBS India

After a weak political outcome, we believe investors will focus on: government formation and choice of prime ministerial candidate considering the BJP does not have a simple majority of its own. Will it still be Modi or someone else?; policy choices to support growth vis-à-vis ensuring macro stability and the reform narrative. We would watch out for (a) upcoming union Budget — our base case is for the government to stick to a medium-term fiscal consolidation roadmap but with a populist bias.

Amar Ambani, Executive Director, YES Securities

“Indian equity valuations were quite rich already, and election result day presented it with the perfect reason to correct themselves. Another 10 per cent correction cannot be ruled out, simply on the basis on where we stand on market multiples.”

Manish Jain, Director – Institutional Business (Equity & FI) Division, Mirae Asset Capital Markets

“Investors like certainty and continuation of policies. India is a long term structural growth story. A lot of elements are in place. Over anything the economics should prevail. We are already on top in factors like GDP, market cap, demographic dividend, etc. It will be an endeavour for all the policy makers to take the country to further heights. I don’t think any derailment on these efforts is in anybody’s interest.

Vinit Sambre, Head – Equities, DSP Mutual Fund

There is bit of uncertainty as investors are concerned about the slowdown of reforms that had been initiated under the BJP-led government. This uncertainty has triggered a correction in the markets as investors reassess the outlook under the new political landscape. We would like to believe that the development agenda that spurred the performance of equity is likely to persist, irrespective of the party in power.

Kislay Upadhyay, smallcase Manager and Founder at FidelFolio

“Even assuming NDA forms govt again but with weaker majority, market could further fall down ~5 per cent over the next week. However, over next few months FPI money that is waiting on the sidelines in risk-off mode could come in heavy and fast as uncertainty around govt goes away. We saw outflow of about ₹25,000 crore in May. With great GDP numbers and govt uncertainty gone, we could see an inflow of 1.5 trillion over next 5-6 months alone. This should result in healthy returns over next 6 months to 1 year.”

Yashovardhan Khemka, Senior Manager, Research & Analytics at Abans Holdings Ltd

“The Election results are showing a less than halfway mark for the current BJP government, pointing towards a coalition government. This will lead to dependence on allies in making key policy decision, and sharing certain cabinet seats, which will lead to policy paralysis and uncertainty in the government’s functioning.

The markets, are pricing the risk associated with this scenario, and the potential impact of shift toward socialistic policies by the government, thus leading to sell-off in the market”.

Rahul Singh, CIO-Equities, Tata Asset Management

The election result is likely to lead to a more balanced market; risk-reward in large caps and underperforming sectors like banking and consumer appears more favourable. On the other hand, there is likely to be greater scrutiny and valuation discipline in the performing sectors like capital goods, power, defence and manufacturing. The macro parameters are likely to remain largely stable and hence provide downside support to valuations.

Historical data suggests that despite initial volatility, markets tend to recover and even thrive in the longer term. For instance, even after the 2014 and 2019 elections, the Indian stock market saw significant gains in the months following the election results. Investors are advised to focus on long-term strategies, such as maintaining a diversified portfolio and avoiding panic selling. Strong fundamentals and resilience against political changes are crucial for navigating market volatility.

 Pradeep Gupta, Co-founder & Vice-chairman, Anand Rathi Group

Till the question of the continuity of the current government was at an unsure position, the market will continue with heightened volatility in the short-term period.

Amit Kumar Gupta, smallcase Manager and Founder at Fintrekk Capital

We are most likely to see Modi continue as PM but with some check and balances. It could be that the BJP will have to be more populist and give more freebies which will drive up consumption, but at the expense of slower public capex spend. It’s also worth mentioning that global long only’s are still largely underweight so I feel that they will wait for opportunities to engage with the market. In the meantime, there was a lot of froth in the market yesterday which has clearly been skimmed. In terms of positioning, policy-oriented sectors like infra, manufacturing, defence, power may take a quarter or so make a comeback Laggards like consumer staples and healthcare may do well in this environment. IT sector is more dependent on global growth.”

Ajay Menon, MD & CEO, Broking & Distribution, Motilal Oswal Financial Services

We expect the volatility around the outcome to reduce over the next few days and market focus to return on macro and fundamentals which continue to remain strong. Once the new government is formed, it will present its first and full budget for FY25 in the next few weeks, where themes like capex, manufacturing, rural, consumption, and credit lending will be back in focus. While the market volatility may continue in the near term, retail investors should take this correction as an opportunity to accumulate quality names in 3-4 tranches. Over the next few days, the narrative around government formation and RBI monetary policy would take centre stage.

Siddarth Bhamre – Head of Research at Asit C Mehta Investment Interrmediates

Now with election results not being one-sided, we are witnessing profit booking. We believe this profit booking may continue for some more time. Spaces like FMCG and IT may see less damage as defensive buying along with valuation comfort may keep them immune to this correction. Though we expect some correction to continue in the market, it would not be fair to consider it as the end of the bull market. Most likely this correction may turn out to be a hiccup in the long-term bull run.”

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