The week ahead would be dominated by politics and would get overtaken by any other form of news. Election to four states which form part of the Hindi heartland would be announcing results for the state election held earlier. These are Madhya Pradesh, Chhattisgarh, Delhi and Rajasthan. Exit polls would begin from the evening of the 4th December and this would drive markets for the next two days. Results would be announced on Sunday the 8th December and the outcome of the same would be the driver for the following week.
Currently of the four states spoken above the Congress is ruling in Rajasthan and Delhi while the BJP rules in MP and Chhattisgarh. The stock market is rooting for the BJP and accordingly registered strong gains on Friday which also happened to be the first day of a new settlement. The markets have gained during the previous week with the SENSEX up574.54 points or 2.84% at 20,791.93 points. NIFTY gained 180.65 points or 3.01% to close at 6,176.10 points.
What are the combinations and permutations that could happen and accordingly affect the markets positively or negatively? The worst that could happen is if BJP loses a state that they control and fail to make any inroads in the two states that Congress is ruling. In such a case the markets could fall about 7-8%. The next situation is where each party holds on to the position that they had previously. In such a scenario the markets would again fall but less than the first case and maybe lose about 5%. The third case would be where BJP holds on to its two states and wins Rajasthan. In such a case markets could rally a further 3-4% from current levels. The fourth case and one which would be the most optimist is that BJP wins three and emerges the largest party in Delhi or scrapes through in Delhi as well. This case or scenario could see markets gain as much as 7-8% and if retail chips in may gain 10% as well.
The above is on the assumption and belief that the markets are rooting for BJP.
Power Grid is coming out with its FPO which opens on Tuesday the 3rd of December and closes on Thursday the 5th for QIB’s and Friday the 6th of December for HNI’s retail and employees.The price band is an attractive 85-90 with a discount of Rs 4.50 for retail and employees. The closing price of Power Grid was Rs 95.05 on the BSE and Rs 95.10 on the NSE. The discount on the current price is Rs 10.05 on the lower band and Rs 5.05 on the higher or 10.57% on the lower band and 5.31% on the higher band. The price is certainly attractive and the issue would get oversubscribed in the retail category. The institutional portion should also do well and I believe that the issue would be subscribed in the institutional category as well.
Besides election and political news the international news flow would centre around FII flows and news about tapering.
