Buy after the election results 2019

There could be a possibility of a significantly reduced number of seats for the NDA after results are declared on May 23. Indian benchmark indices have rallied significantly, following the air strikes in Balakot, which boosted the chances of the return of Narendra Modi as the Prime Minister.

In fact, many analysts and pollsters are now looking at a serious possibility of the NDA falling anywhere between 30 to 50 seats short of a majority.

Therefore, even if they are able to form a government with the support of new regional allies, there is likelihood of a reaction in the markets, thanks to a fragile coalition. This means it is better to buy stocks after the election results are declared, which would help preserve capital.

Why the NDA could fall short of the 272 mark?

The 2019 elections have to be viewed in the context of a few things. The first is that there was a near sweep by the BJP in Western and Northern India in 2014. To get similar number of seats is almost impossible. In fact, the only states where it can make-up the loss is West Bengal and Odisha, which may not be enough. It stands no chance in Southern India.

The biggest problem is the Mahaghatbandhan in UP. If the jolt to the BJP is severe, we might see a further downtick in numbers.

Rural distress and unemployment

In 2004, India was growing at a rate of 8 per cent, and yet former Prime Minister Atal Behari Vajpayee was not re-elected in 2004. At the moment India's GDP for the quarter ending March 31, 2019 came in at just 6.5 per cent.

Going into elections, we have had severe joblessness and rural distress. If these two have been major issues for voters in the two big states of Uttar Pradesh and Maharasthra, the NDA could see a major setback.

Fundamentals not in great shape

The economy also seems to be considerably slowing down, as can be viewed from the IIP numbers as also slowing auto numbers. In fact, the auto numbers have been really bad, which has led to auto shares like Maruti and Hero Motor declining significantly. The NBFC crisis and liquidity votes continue to create problems for the economy.

The one positive is that inflation is within the comfort zone of RBI and we could see interest rates dropping further in the coming days, if crude prices remain subdued.

Global cues a major problem

Global cues too are not very supportive and the Nifty has cracked nearly 5 per cent from historic highs. Trade war with China, a falling rupee and rising crude prices are all playing along. If trade wars between China and the US persist, we could see a further fall in the markets. In any case, the Indian markets look over priced at the moment, and unless we see another 8 to 10 per cent fall in the indices, markets do not look interesting.

The next 1 week is going to be interesting, brace yourselves for some immense volatility.

Await exit polls outcome on Sunday

Investors have two trading sessions to position themselves ahead of exit polls due on Sunday. If we look at the state election of Madhya Pradesh, Rajasthan and Chattisgarh, most exit polls got it right. The only state where exit polls were wrong were in Chattisgarh, where most pollsters got it wrong. So, Sunday evening might give some indication on where we are heading.

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