After a fifth straight day of fall for the BSE Sensex, stock market investors are a bit jittery over what lies ahead, as the seventh and last phase on Lok Sabha elections 2024 concludes tomorrow, exit polls flood TV screens on June 3 and the D-Day, election outcome, set to sway sentiment on June 4.
As per a Business Today survey, analysts and the stock market is factoring in a clear BJP majority i.e. 272 votes and above. Analysts such as Kotak Alternate Asset Managers' Chief Investment Strategist Jitendra Gohil said a 10-20 seat difference in BJP's tally over 2019' 303 seats may not worry investors, as the focus seems to be on political stability. The market upside however looks limited, anlaysts said.
Ahead of the phase 7 of general election, Rajasthan's Phalodi Satta Bazar is suggesting a seat count of around 300 for BJP alone, higher than 290 a few days ago, as per media reports. Business Today survey analysts largely suggested the BJP tally in the 300-320 range. “We maintain our constructive stance on equities ahead of the general election results on 4th June. Our investment committee decided to maintain a neural stance on equities i.e. to stay invested inline with asset allocation," Gohil of Kotak Alternate Asset Managers said.
Days before the election outcome, S&P Global Ratings changed its outlook on India’s sovereign rating to 'Positive' from 'Neutral', which Nomura India said could be followed by other rating agencies. But the development could not lift the domestic stock market, as concerns over rising US bond yields and FPI money moving to 'attractive' China weighed. As per provisional data on NSE, FPIs sold Rs 3,050.15 crore worth equities on Thursday, which was matched by DII buying (Rs 3,432.92 crore).
"We anticipate that large amounts of capital currently lie on the sidelines, waiting to be deployed. On the other hand, India’s weightage in MSCI index is inching up, which means passive money will flow in," Amnish Aggarwal of Prabhudas Lilladher.
On Friday, the MSCI rejig adjustments are slated and India is expected to witness a net inflow of approximately $2.5 billion in passive FPI flows. "Most of the price action is baked in and today will be more of a liquidity event in last thirty minutes," Nuvama said.
F&O trading, June series & elections
Nuvama said June is gearing up to be a volatile series, with the election results on June 4 a focal point for investors, especially with the current ruling government poised for another term.
While the outcome seems certain, attention will shift to the margin of victory, which could spark market excitement, Nuvama said.
"Turning to the Nifty Index, with HNIs starting the series with net long positions at a historic high, I anticipate the index to trade with some caution initially, with more significant action unfolding in specific sectors and stocks. Additionally, FIIs have net SSF long positions but have gone all-in on index shorts as a probable hedge, indicating they don’t want to take any chances. If the election results are favourable, the market could see a big short-covering rally," said Abhilash Pagaria, Head, Nuvama Alternative and Quantitative.
"Our outlook for the June series leans bullish, with broader markets likely to outpace the Nifty index. Historical data over the past decade indicates mixed performance for Nifty in June, with a 50/50 chance of gains. Sector-wise, I'm inclined towards the auto sector once again, particularly favoring Eicher Motors and TVS Motors. Within metals, Vedanta and NMDC should reward on long side. Conversely, on the hedged front (short side), IT names seem appealing," he said.