140509 – Market is suffering from acute disease called Namonia, this disease has not just grappled the Indian investors, #Namonia has sink’ed itself into the body and mind of every FII investing in India. Like we categorize Bacteria into Good Bacteria and Bad Bacteria, Indian investors would surely classify Namonia as a good disease. We are also sure that every investor expects that this should spread across the country, which in turn will bring good times to the country.
We are writing this article in continuation of our Previous MFF article where in we said…
“The short term focus of the markets will be only on the politics front. The market will move only on three type of results expectations 1.BJP led NDA loosing. 2.NDA having an average win and forming govt. with support from others. 3.A Strong NDA and Modi becoming the PM. The market might move differently in each situation, which we will discuss in next writeup.”
Markets, like most people are expecting and wanting a change. Any person or thing in one same place or one chair tends to lose its sheen over a period of time, unless he is proactive and keeps the hope, in the minds of people, off bettering his performance. But when the person or any political party rules the country for many years without doing any good to anyone (except for itself and the corrupt ministers), the people tend to show their anger by pressing the right buttons!
Hence FII’s are pouring money into the #IndianStockMarket expecting that a BJP led, Modi led government will be formed and thus giving the country the right impetus to grow. This is the market expectations which we are mentioning here hence don’t link us to any political party J
We have in our previous article, mentioned about our liking towards the #Banking sector which is proving to be going in the right direction.
Now let’s see what Could happen in the three scenarios mentioned above!
1. BJP/Modi led NDA loosing: Markets would tank! If it’s a scrambled egg type of verdict then we may go down more that 10% in a blink of time. Great support for the #Sensex lies in the range of 18000 – 19500. If say, its not a fractured mandate and even if #Congress wins market will still go down and then gradually move up if the govt. is stable. You may look at stocks from the IT and the Pharma sector in this scenario.
2. NDA having an average win and forming govt. with support from others: Criteria here is Modi becoming the PM. We may see a volatile market with a bias upwards. Modi heading the govt. with weak BJP/NDA will not immediately fuel any rally, its already factored in. Hence their may be a pause with positive bias after seeing how well Modi can implement his vision without any dragging of issues by the smaller parties.
3. A Strong NDA and Modi becoming the PM: We have markets on the counting day and hence would not be surprised if we see an upper ceiling, sending us home early since trades may be stopped for the day! We may see a target of 24350 – 24950 on Sensex on same day! We would recommend being very cautious at those levels. A strong mandate for Modi would mean him doing what he wants! Going by his current speeches we may see levels of 28630 – 30006 on Sensex by end of 2015, IF he walks his talk!
The third scenario will bring all round buying and frenzy into the market led by a recovering economy. Looks like FII’s know who the next PM would be, even before the counting has begun! Most of Indian retail investors are getting out of the markets right now, this is a bad sign!
Whatever is the result, this event will also pass on like any other! Hence though the impact would be there, market will start focusing on the fundamentals soon.
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