Haryana, J&K exit polls 2024 & stock market: Will election results impact Sensex, Nifty? 

The outcomes of the recent state elections in Haryana and Jammu & Kashmir, while not a needle mover, may keep the markets on edge, as exit polls predicted losses for the BJP in both Haryana and Jammu & Kashmir, MOFSL in its latest strategy note said. 

In Haryana, the Congress is projected to win a full majority with 50-58 seats in the 90-member assembly. This would be against a tally of 31 seats in the 2019 polls. The ruling BJP, which is looking for a hat-trick of wins in the state, is seen getting 20-28 seats, a drop from 40 seats in 2019, the CVoter exit poll suggested. 

In Jammu and Kashmir, the Congress-National Conference alliance is anticipated to win 40-48 out of 90 assembly seats. The BJP is projected to win 27-32 seats and Mehbooba Mufti-led People's Democratic Party (PDP) may get 6-12 seats. Other parties and Independent candidates could win 6-11 seats.

MOFSL said that the stock markets appear to be experiencing a genuine tug-of-war between the headwinds and tailwinds. It noted that the monetary stimulus unleashed by China has sparked a wave of tactical FII outflows from India. Corporate earnings, after four consecutive years of healthy double-digit growth, are moderating due to pressures from commodities and fading tailwinds from BFSI asset quality improvements, it said.

Market guru Shankar Sharma on Sunday compared the Congress with China's stock market, which has started going up following stimulus push from Beijing. In a tweet. Sharma, the founder of GQuant Investech, said: "In a stock market sense, BJP is looking like the Indian stock market, and Congress, like the Chinese stock market."

The earnings revisions have turned adverse with downgrades of 6 per cent in the Nifty EPS since July 2024. The recent print from high-frequency indicators, such as power demand, PMI data, GST collections, and auto numbers, also indicates a softening in demand.

"The expensive broader market valuations (NSE Midcap index at 70 per cent premium to Nifty-50 and market cap at 146 per cent of GDP) and the narrowing of market breadth further complicate the risk-reward equation," MOFSL said.

The brokerage however believes the ongoing festive season, better-than-expected monsoon over July-September, and consequent pick-up in rural consumption provide a near-term catalyst for economic activity. 

Major global central banks, with the US Fed at the forefront, have decidedly pivoted towards a monetary easing cycle. This shift implies a favorable environment for risky assets, it said. 

For the September quarter, MOFSL said earnings for Nifty would grow 2 per cent YoY. Excluding global commodities Nifty earnings is likely to grow at 10 per cent YoY.  For Nifty, excluding financials, margin is likely to contract 40 bps YoY to 20 per cent during the quarter.

Among largecaps, MOFSL likes ICICI Bank, HDFC Bank, L&T, HCL Tech, HUL, M&M, Power Grid, Titan Company Ltd, Bharti Airtel and Mankind Pharma. In the midcap and smallcap segment, it likes Indian Hotels, Angel One, Godrej Properties, Persistent Systems, Metro Brands, PNB Housing, Global Health, Cello World, Dixon Tech, and Five Star Business Finance.