(Ashesh Shah/Mint)
(Ashesh Shah/Mint)

Markets may rally as polls show Modi returning to power

  • Some analysts say exit poll results are better than expectations and that markets will move up by 2-3%
  • According to UBS, the Nifty could move up by 5-10% if the Bharatiya Janata Party achieves a single-party majority

Analysts said that the markets are expected to rally after exit polls showed that Prime Minister Narendra Modi's coalition government is likely to return to power after a mammoth general election that ended on Sunday. Polls were released on Sunday evening after the gruelling six-week-long election that started on April 11.

So, the downside now seems to be limited as earlier the markets feared if the NDA will fall short of majority, said Ajay Bodke, chief executive and chief portfolio manager at brokerage firm Prabhudas Lilladher Pvt. Ltd. “The markets had already discounted return of NDA. If the BJP on its own crosses halfway on May 23 then the markets can brace for a big rally. The markets will be focussed on who will be in charge of key ministries like finance, roads, mining, steel, commerce, steel and civil aviation," he said.

Analysts said that the markets are expected to rally after exit polls showed that Prime Minister Narendra Modi's coalition government is likely to return to power after a mammoth general election that ended on Sunday. Polls were released on Sunday evening after the gruelling six-week-long election that started on April 11.

So, the downside now seems to be limited as earlier the markets feared if the NDA will fall short of majority, said Ajay Bodke, chief executive and chief portfolio manager at brokerage firm Prabhudas Lilladher Pvt. Ltd. “The markets had already discounted return of NDA. If the BJP on its own crosses halfway on May 23 then the markets can brace for a big rally. The markets will be focussed on who will be in charge of key ministries like finance, roads, mining, steel, commerce, steel and civil aviation," he said.

Others concur. Motilal Oswal, CMD, Motilal Oswal Financial Services said, "The exit results are better than the expectations. Markets will move up by 2-3 % in next few days."

Deepak Jasani, Head of Retail Research for HDFC Securities said, “The markets may see some positive reactions (gap up opening in Nifty by 90-150 points) in first half of trading session on Monday but later the focus is likely to shift to global events and corporate earnings till the actual results are out. Exit polls have been proved off the mark in the past. The markets will then react to actual election outcome by Thursday afternoon. FIIs may start nibbling Indian equities from Monday."

According to UBS the Nifty could move up by 5-10% if the Bharatiya Janta Party (BJP) get single-party majority and if BJP-led NDA wins over 250 then the Nifty could move up by 5% to touch its recent peak. “Nifty is trading at 20 times 12 months forward price to earnings (on our topdown earnings forecast) and we think the risk-reward is unfavourable, looking beyond the immediate market moves next week. The reality check of fiscal slippage and/or a negative growth surprise, awaits markets post this binary event," said UBS in a note on 16 May. Nervousness had gripped Indian markets ahead of the election results. The markets have lost nearly 3% in this month so far though global equities too continued their pressure on India.

Exit polls have not been accurate for the last three national elections. In 2004, exit polls wrongly forecasted BJP-led NDA coalition winning again, while in 2009, they meaningfully underestimated Congress-led UPA's seat share. In 2014, while exit polls correctly predicted a BJP-led NDA victory, they significantly underestimated the margin of victory.

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