After June 4: Stock Market Outlook – NDA Secures 350 to 370 Seats, Anticipate a Stormy Surge; Less Than 300 Seats, Brace for Market Upsets
As the election fervor grips the nation, speculation abounds regarding the impact on the stock market. A surge in activity is predicted immediately following the election results, particularly with Prime Minister Narendra Modi and Home Minister Amit Shah’s decisive victory. Such optimism has fueled expectations of the stock market reaching unprecedented heights under an NDA government.
The BJP’s rallying cry for 400 seats has stirred the market, although a slight deviation from this target could temper the market’s exuberance. Predicting election outcomes remains challenging, heightening anxieties among investors. Should the NDA achieve the coveted 400-seat mark, the stock market could experience record-breaking momentum. Conversely, a shortfall in BJP’s tally may lead to a more cautious market sentiment.
As June 4 approaches, stakeholders are on edge, deliberating their strategies amidst the uncertainty. Reflecting on past election outcomes and market reactions can provide valuable insights into navigating this dynamic landscape.
Exit Polls and Market Trends: Analysis of June 3
With the closure of the Sensex at 73,961 on Friday, June 3, exit polls are set to determine the market’s course. Exit polling will commence this evening following the seventh phase of voting on Saturday. While the stock exchange will remain closed on Sunday, the market will open on Monday based on the exit poll results.
If Monday sees a bullish trend, it is anticipated that Tuesday, post the election outcomes, will witness even greater momentum. However, everything hinges on the election results. Reviewing the recent stock market performance, on the last trading day of May, i.e., Friday, May 31, the market saw an upsurge.
The Sensex closed at 73,961, marking a gain of 75 points, while the Nifty recorded a rise of 42 points, closing at 22,530. Among the 30 shares in the Sensex, 17 showed gains while 13 experienced losses. Adani Group witnessed gains in all its 10 shares, with an overall increase of 9.40%.
Post-Election Scenarios in the Stock Market: Expert Insights
Hitesh Somani, the MD of “Apna Investment” and an expert in Ahmedabad’s stock market, outlines four potential outcomes for the stock market post-June 4 election results.
- BJP Secures 400 Seats: If BJP achieves a landslide victory with 400 seats, the market could witness a surge of 5 to 10 percent.
- BJP Secures 350 to 400 Seats: In case BJP secures between 350 to 400 seats (a highly probable scenario), the market may hit an all-time high.
- BJP Secures Fewer than 300 Seats: If BJP wins but falls short of 300 seats, it could create panic in the market. Since the market has set high expectations with the criteria of crossing the 300-seat mark, failure to meet this may lead to a short-term downturn of 5 to 10 percent.
- BJP Doesn’t Win: If BJP fails to secure victory, although this scenario seems unlikely, it could result in chaotic market conditions.
Investment Strategies Post-Election: Insights from Hitesh Somani
Hitesh Somani suggests that if BJP wins the elections decisively and secures a good number of seats, the Indian stock market could witness significant growth over the next five years. In such a scenario, investors should focus on specific sectors, with infrastructure being the primary choice.
The infrastructure sector, including road and development projects, is expected to remain profitable. Another promising sector is large-cap stocks. While these stocks may not have shown substantial movement in the past three years, a strong BJP victory could potentially lead to significant returns in the next two years.
Companies like Reliance, Infosys, TCS, and Wipro, which are part of the Nifty Fifty, could offer substantial returns over the next three years. Hence, investors should refrain from selling stocks they currently hold and consider buying new ones after assessing the market post the June 4 election results. Decision-making can commence from June 5 onwards.
Analyzing the Election Results and Market Sentiment
According to Nikhil Bhatt, a research analyst at Investment Point in Jamnagar, the current market sentiment appears positive, with no significant indications of decline. This optimism stems from the continuous increase in the number of demat accounts and the rising turnover on a daily basis.
The true state of the stock market will heavily depend on the forthcoming full-scale budget. The upcoming month will prove crucial for the stock market, with June typically being a pivotal month. A positive month can stimulate demand and act as a catalyst for further growth, while a negative month can serve as a warning sign, prompting caution among investors. These indicators will play a crucial role in determining the future direction of the stock market.
Prime Minister Modi and Home Minister Shah’s Take on the Stock Market
Prime Minister Narendra Modi and Home Minister Amit Shah have also discussed the stock market. During a recent interview with Economic Times, Prime Minister Modi expressed confidence that the victory of the BJP will lead to a record surge in the stock market. He predicted that after the results, the entire week will witness such active trading that operators will be on their toes.
He emphasized that in the last ten years, the market has seen a journey from 25,000 to 75,000. Prior to this, Home Minister Amit Shah, in an interview with NDTV, stated that after June 4th, the stock market will experience a forced surge. This indicates that the stock market’s discussion is taking place in this election like never before.
Stock Market Trends in Recent Indian Elections
2009: Stability Amid Political Transitions
In the 2009 Lok Sabha elections, which took place between April 16th and May 13th, the stock market witnessed relatively stable fluctuations. The Sensex closed around 11,732 points on April 16th, and by May 13th, it had reached approximately 12,173 points. However, in the weeks following the announcement of results, the Nifty experienced a decline of 21.5%.
2014: Volatility Surrounding a Landslide Victory
As voting commenced in 2014, the Sensex was around 21,140 points in January, eventually climbing to 22,386 points by the end of March. The period leading up to the elections witnessed increased volatility, with the Sensex hovering around 21,700 points before the BJP’s victory under the leadership of Narendra Modi. In the aftermath of the results, the Nifty surged by 5% in just one week.
2019: Tensions and Escalations
In January 2019, as the Lok Sabha elections loomed, the Sensex was around 36,068 points, dipping slightly to 36,063 points by February. However, following the Balakot airstrikes on February 26th and the subsequent escalation in tensions, the Sensex surged to 38,673 points by March 29th. Despite volatility during the voting period, the Nifty saw a 3.5% increase during the fortnight surrounding the elections.
2024: Pre-Election Jitters
Ahead of the 2024 Lok Sabha elections, the Sensex witnessed a significant drop, closing below the 76,000 mark on May 27th and further declining to 74,454 points on May 29th. As voting began, the Sensex experienced a sharp decline, dropping by 674 points, while the Nifty fell by 183 points, signaling potential turbulence in the market following the election results, which are awaited on June 4th.
Anticipated Impact of the Lok Sabha Elections on the Stock Market
As the Lok Sabha elections progress, with five phases of voting completed and the remaining two scheduled for June 1st, speculation about the electoral outcome is rife. In a recent interview with the Indian Express, Home Minister Amit Shah expressed confidence in the performance of the National Democratic Alliance (NDA), estimating that the coalition is likely to secure between 300 to 310 seats out of the total 543.
However, he refrained from discussing the numbers for the sixth phase of polling. Shah’s assertion implies that if the NDA indeed achieves this tally after the fifth phase, surpassing the 300-seat mark, obtaining a majority beyond 400 seats after the seventh phase might prove challenging. Therefore, analyzing the electoral outcomes becomes crucial in predicting the post-election market trends and navigating potential fluctuations in the stock market.
Potential Profit Booking Opportunities with a Strong Government
Market experts suggest that if the NDA government secures a clear majority, the Sensex could swiftly surge to 77,000, Nifty to 23,700, and Bank Nifty to 53,000. Over the past few weeks, the market has been witnessing consistent growth, attributed to strong local support and anticipation of a robust government formation.
With expectations of more than 370 seats for the NDA, sectors like railways, defense, and PSU stocks may witness a surge of 5 to 20%. However, volatility remains high. Nifty VIX has reached a two-year high amid the continuous uptrend in the market. Therefore, post-elections, investors could capitalize on substantial profit booking opportunities with the market riding high on the back of a formidable government.
NSE Circuit Filter Announcement for Election Result Day
On the day of election results, the National Stock Exchange (NSE) has announced the implementation of circuit filters in the stock market concerning the likelihood of high volatility. If the market fluctuates by 10 points above or below, trading will be halted for 45 minutes in such scenarios. For instances where a 10-point circuit breaker is triggered between 1:00 PM to 2:30 PM, the market will be paused for 15 minutes, followed by a pre-open call auction session.
Once the market resumes after 2:30 PM with a 10-point circuit in place, trading will continue. However, if a 15-point circuit breaker is triggered, the market will halt for 1:45 minutes, followed by a 15-minute pre-open session. Between 1:00 PM to 2:30 PM, if the market is closed due to a 45-minute halt, followed by a 15-minute pre-open session, and a circuit breaker is then triggered after 2:30 PM, trading will not be affected.
If a 20-point circuit breaker is activated during market hours, trading will be suspended temporarily until the situation stabilizes. This proactive measure aims to ensure market stability and prevent abrupt fluctuations during crucial events like election result days.
