Likely to rally as exit polls favour BJP in Uttar Pradesh
Investors should wait for final result: Analysts
markets’ disappointment is large if BJP loses on March 11 since investors will be worried about the government taking more populist measure to prepare for the general elections in 2019.”
Yet others such as Dipen Shah, senior vice-president and head of private client group research, Kotak Securities Ltd and Abhijeet Dey, a senior fund manager (equities) at BNP Paribas Asset Management Co, believe that the exit polls may not evoke much of a reaction since current prices have factored in a BJP win.
“The numbers from exit polls indicate either BJP winning, or a hung assembly. The market has moved up in the anticipation of a BJP win, and that possibility is discounted,” said Shah.
While traders haven’t built up any hedges or bought downside protection against an adverse election outcome, as Bloomberg reported on Tuesday, there has been an increase in investor nervousness around the time the markets hit a two-year closing high earlier this week. In the last four trading sessions, the India VIX has gained 7.7% to close at 14.39. on Thursday; benchmark indices closed little changed.
The increase in valuations is adding to caution. That this rally has been liquidity-driven can be seen in the simultaneous rise of the Sensex’s forward price-toearnings multiple. The Sensex is currently trading at 16.86 times estimated earnings for fiscal 2018, a tad above its five-year average.
In any case, if liquidity continues to flow in, the markets may well shrug off any disappointment and move on to other triggers, said experts.