BJP seat wins, stock market: Will there be buying or profit booking post elections?

A negative knee-jerk rection is all likely in case BJP, which is seen getting a majority of its own, fails to meet Street expectations on seat wins in the ongoing Lok Sabha elections, a Business Today survey of analysts suggested.  Ahead of the seventh phase of elections, analysts were unsure whether the incumbent party meeting or surpassing Street estimates will bring further rise to Sensex and Nifty following the recent gains, with some seeing 2-5 per cent rise on indices while others anticipating profit booking at higher levels.

If BJP wins with a significant majority, one might see some profit booking at higher levels, as investors who have been buying over the last two months seek to capitalise on their gains, said Arpit Jain, Joint MD at Arihant Capital. 

"However, the long-term outlook remains unchanged. If the results mirror those of 2019, we expect a similar market reaction. Should the BJP fall short of a majority but still form a government with NDA's support, we might witness a market correction, presenting an opportunity to buy select stocks," Jain said. 

Narendra Solanki, Head Fundamental Research for Anand Rathi Shares and Stock Brokers said the market has factored in a majority for the incumbent government. However the number of seats may still be not priced in the 300 or 400 extremes. In case its near 400, one can expect some upside, Solanki said.

A BJP win with a thumping majority will be very positive outcome while BJP at Centre with the help of NDA alliance would be a neutral event, said Amnish Aggarwal, Head of Institutional Research at Prabhudas Lilladher.  

"Markets always looks for a forward looking promising government, which is expected to continue its last term plans & vision without break and change in policies," said Nikunj Saraf, Vice President, Choice Wealth. 

Safar said in case the INDIA coalition manages to get over the halfway mark, led by the Congress, a good selloff across most domestic-oriented sectors is likely. He believes even if BJP falls short of a majority but secures control of the government with the help of NDA allies, a selloff in highly valued domestic-oriented sectors like industrials, infrastructure, and PSUs is likely. A BJP majority with over 272 seats will be a positive outcome, he said. 

"If the Modi government is able to secure a strong majority, it is expected to generate a favorable market reaction. In a similar vein, if the 2019 election results were to be replicated, we might see an initial surge in the market, although this could be dampened by certain concerns that may lead to potential corrections. If a BJP coalition government with NDA support comes into play, market sentiments might go through a corrective phase, which could make investors skeptical," said Ravi Singh, Senior Vice-President (Retail Research) at Religare Broking. 

SAMCO Securities sees a 20 per cent chance of the NDA alliance winning over 400 seats, 70 per cent probability of it retaining power with over 272 seats; and a low 10 per cent outside chance of NDA failing to secure a majority. In the first two scenarios, it sees 2-5 per cent rally on Nifty while in the third case it sees a 10 per cent correction for stock market ahead.