Equity markets could open higher with exit polls suggesting a win for BJP-led govt

Exit polls suggest the Narendra Modi-led NDA retaining power at the Centre


Equity markets could get some boost on Monday with exit polls announced by various agencies and TV channels suggesting the Narendra Modi-led National Democratic Alliance retaining power at the Centre, which will mean continuity of policies.

"As per exit polls, the NDA led by the BJP is likely to easily cross the half-way mark. Markets will heave a big sigh of relief as it favours continuity and familiarity in terms of roll-out of policies," said Ajay Bodke, CEO, PMS at broking firm Prabhudas Lilladher.

There were worries that in the backdrop of the Congress being rejuvenated after winning assembly elections across key states of Madhya Pradesh, Chattisgarh and Rajasthan, and an alliance of the Samajwadi Party and the Bahujan Samaj Party in key Uttar Pradesh, the BJP would find the road to the Lok Sabha 2019 tough. Investors don't like uncertainties. Already, over the past couple of weeks, escalating trade tensions between the United States and China have rattled equity markets worldwide. The exit polls suggesting a continuity of the NDA government should provide some temporary fodder for the bulls in the market, till the election results are actually announced later in the week.

"The street would like it even more if the BJP on its own gets a majority in the Lok Sabha. However, going by the way the exit polls in the last two elections were off the mark from the actual numbers, the markets would get excited but not super excited," said Deepak Jasani, head of retail research at HDFC Securities.

It was a roller coaster ride for investors over the last five sessions, with the BSE's benchmark Sensex at 37,462.99 on May 10, hitting a low of 37,090.82 points on May 13, and then closing at 37,930.77 points on May 17. While the initial part of the week was driven by worsening trade ties between the US and China, the week ended on a high with the Sensex jumping 537 points and NSE Nifty50 gaining 150 points on Friday, with the market largely expecting a NDA win.

This week could be equally volatile, with investors likely to cheer exit poll results on Monday, but getting nervous as the actual result day nears.

"We are now stepping into a crucial week and since the election verdict is one of the most watched as well as influenced event for our market, people should gear themselves up for wild swings," said Sameet Chavan, chief analyst - technical, Angel Broking.

Institutional investors will look forward to the structural reforms strongly pushed by the Narendra Modi government like the Goods and Services Tax, Insolvency and Bankruptcy Code, Real Estate (Regulations and Development) Act and direct benefits transfer among others, said Bodke.

However, with a benign inflation, investors will also be keen to see how any new government kick-starts a slowing economy, revive consumption and private investment as well as rejuvenate exports, say analysts.

Jasani of HDFC Securities says the Nifty index could open with a gap of 90-150 points on Monday and later consolidate. Corporate earnings to be announced over the next 2-3 days, such as Tata Motors on Monday, as well as global geo-political developments will also weigh on markets till the results day.