New Delhi: The Dalal Street is expected to see a 15% correction over the next 6-8 weeks, as concerns of a hung Parliament and fear of companies’ earnings declining may bear upon the market sentiment, global financial services major Bank of America-Merrill Lynch says.
“Over next 6-8 weeks, we think concerns of a hung Parliament post-election will likely (sic) worry the market and coupled with expected slowing earnings, we believe could lead to a 15% correction in markets,” Merrill Lynch analyst said in a report.
Historically, the markets have been positive in the run up to the elections but they turn jittery as the actual counting comes close, the report said.
In three of the past four elections, markets have given a negative return one month before the results, it added.
“We believe this year the markets are starting with an expectation of a hung Parliament. We are, therefore, looking at a downtrend in the market ahead of the counting on 16 May...the nervousness will continue till we get a stable government,” the research report stated.
A ‘hung Parliament´ refers to a situation wherein none of the major political parties or combinations would be able to come to power.
Further, post-elections near-term movement of the market tends to react to the nature and shape of the government.