After a volatile week, further volatility is in store in the run-up to the state election results, due tomorrow, say analysts. Weak Asian markets and uncertainty over the outcome of state election results sent Sensex over 650 points lower today in early trade. The Nifty breached 10,500 at day’s low. Rupee and bond prices also fell today.The BJP and Congress are locked in a close contest in states of Madhya Pradesh and Chhattisgarh while the latter has an edge in Rajasthan, according to exit polls published on Friday. The Nifty lost nearly 1.5% in the week gone by while the correction was deeper in midcap and smallcap stocks. Stock markets may remain under pressure on Monday, say analysts.

Sanjiv Bhasin, executive VP-Markets & Corporate Affairs, IIFL Securities, says: “The Nifty has already been in correction mode due to selloff in global equities. We expect a gap-down reaction but the correction may be gradually bought into as markets will discount state election results as macros are improving for India."

The Nifty had rebounded 5% in November, outperforming most of the emerging markets as fall a fall in oil prices, bond yields and the recovery in rupee improved sentiments.

G Chokkalingam, founder & managing director of Equinomics Research & Advisor, said: “We firmly believe that the results of state elections do not matter much for the stock markets. There may be knee-jerk reaction in the markets depending upon the outcome, but it shouldn’t give any fear for the markets for two reasons. State elections are different from the Lok Sabha elections. While state elections are generally influenced by anti-establishment waves and local political issues, the elections for the Lok Sabha are largely fought for all-India leadership."

“What matters to the stock market is continuity in economic reforms and stability of the government at the centre. Market cycles come and go – but history proves that in the long term they always reward the investors," he added.

Market expert Ambareesh Baliga in a blog said that cues from exit polls and Friday’s fall in US stock markets point to an extended correction for Indian stocks. “However, history has proved that markets perform irrespective of the government at the centre, as long as the government is not anti-business," he said.

He suggest using the market volatility as an investment opportunity.

For traders, market expert Sandip Sabharwal has a note of caution, warning that volatility will be high. The best way to trade the election day volatility - Don’t trade," he tweeted.

Meanwhile, foreign investors pulled put close to 400 crore from the Indian stock market in the last five trading sessions amid selloff in global equities. This comes following a net inflow of over 6,900 crore in the equity market by Foreign Portfolio Investors (FPIs) on easing crude oil prices and a strengthening rupee.

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