The sensex might see a downfall in case there is no clear mandate after elections. The market is not going to sustain recent rallies if there is a hung parliament,i.e. no party gets a clear majority to form government at the centre . This will be a shot in the arm of Left-parties and they will wield immense power in govt. formation which ,in turn, will not be a healthy sign for the battered Indian economy.
With the market not showing any downturn for some days, it can be assumed that the tough times are over. But you never know when market will take a turn contrary to the perception of masses. And the election results can play a spoilsport if third front ( i don't know whether it exists in reality or in election speeches) emerges as kingmaker. It is in the interest of Indian economy that any alliance( as chances of any single party getting the mandate are remote) gets a clear cut majority to form the govt. at the centre because only a strong govt. can take strong decisions to revive the economy.
Many analysts ,worth their names, have said that the recent upswing was a result of bear market rally. But whether this is a bull market rally or a bullish phase in a bear market is still debatable. One can go on arguing till the cows come home. But in my opinion, it is not for nothing that the market has reached these levels. There is something which has helped the market to bounce back to the current levels. Whether this rally continues after the elections is hard to predict at this juncture as a lot depends on the results.
As an investor we should not be concerned about whether its bullish rally or bearish one. Rather we should be more interested in following the trend. One thing i have learnt ( although after loosing some money) that never have pre-concieved notions about the market movement. Either get along with the trend or just stay away....or else you are inviting troubles.
Let us logically weigh the possible three outcomes of the elections:
(i) A Congress-led government at the centre will bring a sigh of relief to the markets as they are expected to take some hard decisions in the large interests of economy and if we are able to sustain the current bounce back, we will rally some more in salutation.
(ii) The BJP-led NDA govt. at the centre will be a positive sign for the entire broking community and the market will rally more.
(iii) And third-front coming to power or even emerging as kingmaker will be a serious concern as they will pose a threat to the economic reforms.
A Nielsen study indicates over 200 seats for the Congress-led UPA which is far removed from what other pundits are saying. If that is the case, then chances are that there will be a Cong led govt at the centre and this will certainly boost the economy. Having said that, there would still be a fair amount of nervousness leading up to counting day and one can expect unwinding of positions ahead of that which can lead to downturn in the sensex.
The degree of volatility would depend on the emergence of third front as kingmaker. However the possibility of market testing new lows seems to be a distant one. In addition what is seen as a bear market rally, positive news coming from US seems to play a dominant role in current market rally and hopefully the trend will continue in future.
" Happy investing....."
Its high time that people realize the value of their vote and send only those people to the parliament who can work hard to revive the economy...Leaders who are indifferent to the national interests should be taught a lesson ....Thanks for such a nice analysis on the various outcomes of the election and the after-effects on economy...Bears will take advantage of any uncertainity to bring a downturn in the market... So little cautious approach to be followed from now onwards.
ReplyDeleteAakash Agarwal,
Indore