Markets and politics are very closely aligned and especially when it comes to elections it is even more so. The markets have gone quiet over the last couple of weeks and are biding their time to see the exit poll and then the actual results, all of which are due in the next 10 days.
The current ground reality and expectation is that there would be a change in government which would be stable. The BJP led NDA would garner a majority with its pre-poll alliance and it is quite likely that there may be some more alliances post the government formation. These elections have become extremely dirt with the language being used certainly not parliamentary. What is quite appalling is that this election is a matter of all against one. We have the Left parties who have a presence which is restricted to Tripura, West Bengal and Kerala wanting to decide the contours of the next government when their own numbers have been reducing constantly. The so called secular parties whose presence is limited to single states want to form a front and the government. India is a democracy and the single largest party or group of parties with an alliance prior to the election are called to form the government if in the opinion of the President of India he so believes that they can impart stability.
Instead of fighting the election and try and win the maximum seats we have leaders saying that those who vote for NaMo should drown in the sea and some others that such voters be sent to Pakistan. These statements reflect the insecurity of these leaders and echo their sentiments. Very clearly they see that they have failed to hold the masses and the majority of people want a change.
Opinion polls, ground swell, voting percentage increase and the frustration of people over the inefficiency of the incumbent government over the last ten years indicate that there would be a change. It is this change that the market is not only rooting for but waiting with bated breath to hear in the exit polls next Monday.
Let us now understand what can go wrong from a market perspective. The last two elections in 2004 and 2009 saw a down circuit when the NDA lost and an up circuit when the UPA won. Irrespective of all probable outcomes neither of these events are possible this time. The upward circuit is ruled out because of the base shifting to 22500 on the SENSEX which means one needs a movement of over 4,000 points for a circuit. Similarly the worst possible mess cannot see the market fall 4,000 points as the fundamentals of the economy would not allow such a fall and there would be large institutional buying if such an opportunity arose.
The question then is what could happen? The belief or expectation is that the BJP is expected to get around 230-245 seats on their own and with their pre-poll alliance anywhere past the 272 mark which could stretch to 280 or thereabouts. If this number changes on the upside dramatically with the BJP inching towards the halfway mark on their own there could be some euphoria and markets may rise 3-5% but this also would get largely factored in post exit polls and pre result day. If this number falls for the BJP and comes around 210-215 there could be a similar fall of 3-5%.
There is an interesting rally to be held in Amethi today which would be addressed by NaMo and this would be after the rally which was addressed by RaGa earlier. Whether this rally today could swing the voters and cause a debacle or not, the turnout at the rally would be very interesting. Temperatures in the country rise every summer and have reached close to 48-50% in many parts, but the political temperature makes the weather even hotter.
The markets await the 12th of May and then the 16th of May, but as mentioned earlier do not expect too many fireworks this time.
