NIFTY MAY HIT 10,500 IF BJP WINS GUJARAT: ANALYSTS
Any negative surprise in the state for the party, however, can take the 50-share index to 9,700 levels, they suggest
The markets are likely to remain choppy over the next two trading sessions as they react to the exit poll outcome (on Friday) and the counting of votes (on Monday) for the recently held Assembly elections in Himachal Pradesh and Gujarat. In a worst-case scenario, where the Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) secures less than 100 seats of the 182 that went to poll in Gujarat, analysts expect the National Stock Exchange’s Nifty 50 to dip to 9,700.
Exit polls released Thursday predict BJP would win Gujarat, giving the Modiled party between 99 and 128 seats (92 for majority). Congress, on the other hand, is predicted to bag 64-82 seats.
After a stellar rise of around 26 per cent thus far in calendar year 2017 (CY17), the benchmark indices — S&P BSE Sensex and the Nifty 50 — have mostly remained flat in December.
Going into the state election results, opinion polls suggested that the BJP will wrest control from the Congress in Himachal Pradesh and will retain Gujarat, although with fewer seats than in 2012.
The outcome of the state elections, experts say, is likely to be viewed as a referendum on the prime minister’s performance, especially the implementation of the goods and services tax (GST) and could have an impact on future economic policy decisions.
“The base-case scenario is that the BJP will win in Gujarat, albeit marginally. Anything dramatic will see the markets sway sharply on either side. Traders have taken positions (both long and short), which will need to be covered. As a result, the index movement will get magnified,” said U R Bhat, managing director, Dalton Capital Advisors.
In the immediate term, however, analysts expect the election and the exit poll outcome to keep markets volatile and witness a kneejerk reaction till the time a clearer picture emerges. They rule out a sharp rally, unless the BJP is able to positively surprise.
Bhat of Dalton, for instance, sees the 9,700 level as a bottom/support for the Nifty 50 index in case of an adverse (less than 100 seats in Gujarat) outcome, which also is its 200-day moving average (DMA). “A victory can see the Nifty 50 rally up to 10,500 levels. However, it can surge to 10,700 levels in case it (BJP) is able to secure over 150 seats in Gujarat,” he said.
That said, some analysts are also of the view that the markets are already discounting a BJP win in Gujarat even though the margin of victory will be thin. A big win in the state, however, they feel has the potential to propel the Nifty higher.
“A government formation by the BJP or the NDA (National Democratic Alliance) will be viewed positively by the markets. More than the index, this will reflect in individual stocks that have been hammered over the past few sessions. The Nifty 50 index should hit 10,400–10,500 levels in case of a favourable outcome. I think it will be difficult for the index to cross this unless the BJP is able to secure over 140 seats in Gujarat,” said Kunj Bansal, executive director and chief investment officer at Centrum Wealth Management.