As the curtains draw to a close on the Lok Sabha election 2024, all eyes are on the stock market and its anticipated response to the election results set for June 4. The current buzz surrounds the BJP, which appears poised for another term, creating an air of expectancy among investors. This period is especially crucial as it coincides with the June F&O trading series, which is gearing up to be particularly volatile.
The BSE Sensex has been on a downward trajectory for the past five days, reflecting a sense of unease among market participants. This jitters are largely tied to the political landscape, as the seventh and final phase of the elections wraps up. Exit polls, flooding TV screens by June 3, will set the stage for the grand reveal of the election outcome the following day.
A BusinessToday survey indicates that analysts and the market are factoring in a clear BJP majority, pegged at 272 seats and above. Jitendra Gohil, Chief Investment Strategist at Kotak Alternate Asset Managers, notes that a 10-20 seat difference from the BJP’s 2019 tally of 303 seats may not cause significant concern, as political stability is the primary focus.
In Rajasthan, the Phalodi Satta Bazar, an informal betting market, is suggesting a BJP seat count of around 300, up from 290 just a few days ago. This aligns with the general sentiment of analysts who forecast the BJP tally to fall in the 300-320 range. Kotak Alternate Asset Managers maintains a constructive stance on equities, advising investors to align their investments with asset allocations and remain neutral ahead of the election results.
The broader financial context also includes a notable change from S&P Global Ratings, which recently upgraded India’s sovereign rating outlook to ‘Positive’ from ‘Neutral’. While this development should ideally boost market sentiment, rising US bond yields and foreign portfolio investors shifting funds to more attractive opportunities in China have tempered the impact.
On Thursday, FPIs sold equities worth Rs 3,050.15 crore on the NSE, a move counterbalanced by DIIs who bought Rs 3,432.92 crore worth of equities.
Looking ahead to the June F&O series, analysts at Nuvama predict a volatile market, with the election results being the focal point for investors. The certainty of the BJP’s win is not as crucial as the margin of victory, which could ignite market excitement.
Nuvama’s Abhilash Pagaria anticipates cautious trading initially, with significant action unfolding in specific sectors and stocks. High Net Worth Individuals have started the series with net long positions at a historic high, while FIIs have hedged their bets with significant index shorts.
Sector-wise, there’s a bullish sentiment towards the auto industry, with stocks like Eicher Motors and TVS Motors favored by analysts. The metals sector also shows promise, particularly Vedanta and NMDC.
On the flip side, the IT sector appears appealing for hedged positions. Passive investment flows are also expected to make a notable impact. With the MSCI index adjustments slated for Friday, India is projected to see a net inflow of approximately $2.5 billion in passive FPI flows, signaling a liquidity event that could influence the market significantly.
