The markets are celebrating and celebrating in style. They rose a good 3% plus on Friday and made new lifetime highs. No the results are not out, but there is a leak of information about the exit poll done by a leading channel. These exit polls are based on eight rounds of polling and the ninth round alone is left which would be held on Monday. Polling for 41 seats would be held in the ninth round and also decide the outcome of the most high profile election in Varanasi or Kashi.
The exit poll or more appropriately the leaked exit poll says that the BJP led NDA would secure a majority. If the pre-poll alliance does it one can be very sure that many more like minded parties would join the alliance. One must remember that the Vajpayee led alliance had many partners and two of them have already returned to the front this time around. I believe political compulsions will force many more of them to join the front.
Last week saw the markets react negatively on Wednesday when one of the channels associated with the TV-18 group painted a gloomy picture of the BJP and its NDA led alliance. The markets fell on that day. I am prompted to ask the question what happened. On what basis was this new assessment made when exit polls are banned until the last round of elections are over. How was this channel able to make new assessments and post a fresh picture? Was it the overnight dream of the editor in chief or was it planted? I believe it was a motivated story as the person concerned the editor in chief of that channel is joining a new channel which is promoted by a sitting MP of the Congress party and is also re-contesting this time as well. This could also be attributed to political rivalry as another popular channel has taken sides with the present opposition. I am sure everyone reading this newsletter would be aware of what channel and person I am talking, but just in case of doubt, it is RajdeepSardesai who would be joining Naveen Jindal promoted Focus TV.
Not much would happen on Monday in the markets and entire focus would be on Tuesday. There would be volatility at the start of trading as markets adjust to the consensus of exit polls which would be telecast from Monday evening onwards and the newspapers on Tuesday morning. If the consensus or average of these polls indicate that the NDA would form a majority there may not be much of price movement or volatility. On the negative side if exit polls indicate that the NDA would struggle to make the halfway mark there would be panic and markets could fall and surrender all the gains of Friday and more. On the positive side if BJP is closer to the halfway mark on their own markets could rally further. Tuesday to Thursday would be all driven by exit polls, TV channels and newspapers. The grand finale would be Friday where by 12 noon things would be clear.
Assuming the markets get what they have been rooting for, which is a clear mandate for a change in government and one that would be stable, there would be some upward move but not much thereafter. Markets would probably consolidate till expiry and fresh moves would take place in the June series where cabinet formation, pre-budget discussions etc would begin to happen. If however the results do not come up to the leaked exit poll and market expectations of a clear mandate the disappointment and the loss in prices could be big. A fall to around the 6200-6300 levels may happen.
What about post results, if everything is as expected. Valuations currently are just reaching the level of being fully valued. However the expectation of a bull run from here is on the basis of the Indian economy turning around or getting a new focus. The Gujarat model and the success of industry in Gujarat needs to be replicated all over the country. If this begins to happen things will certainly get a boost.
Let’s keep our fingers crossed and hope that the results are the same or better compared to the leaked exit poll. If that happens it would be the right time to invest in the market.