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Last Updated : May 19, 2019 09:54 PM IST | Source: Moneycontrol.com

Exit polls could lead to a gap up on Monday, but gains unlikely to sustain

According to a comprehensive News18-Ipsos exit poll, the BJP is likely to gather over 336 seats, while Republic-CVoter sees BJP hitting 287 and Congress gaining about 128 seats.

Kshitij Anand @kshanand

The Nifty50 which has rallied by over 2 percent or about 250 points in the run-up to the Exit Polls could well see a knee jerk reaction on the upside of about 100 points or more as poll predicts a comfortable sweep for the National Democratic Alliance (NDA).

However, the gap-up is unlikely to sustain and we see profit booking at higher levels, suggest experts.Traders are advised to either hold their positions or book partial profits at levels around 11,800, they say.

Close

According to a comprehensive News18-Ipsos exit poll, the BJP is likely to gather over 336 seats. Republic-CVoter sees BJP hitting 287 while Congress gaining about 128 seats.

Experts feel that anything above 270 for the NDA on May 23 will be positive for markets. The kneejerk reaction could take the index higher by over 100 points but the gap-up is unlikely to sustain.

"Unless the actual outcome varies by 10 percent on either side from the 300 mark, the market has more or less discounted. In a way, exit polls will be a non-event, and on the day of results, markets will cheer the results with the upper limit at 11,700-11,800 which will be a good point to sell," Umesh Mehta, Head of Research, SAMCO Securities told Moneycontrol.

"Based on the exit polls, the market is likely to open with a gap-up on Monday, but then towards the close, we could see some profit taking," he added.

Sanjeev Jain, VP Equity Research at Sunness Capital India Pvt Ltd, told Moneycontrol that the Nifty may open with a gap of 100-150 points on Monday but will take a breather.

"Majority of exit polls are in favour of BJP led NDA government but no of seats are near about the magical figure of 272. So the clear indication is still gloomy. However, party-wise exit poll yet to come, which we need to watch closely that how much BJP is getting alone," he added.

Well, investors should take the results with a pinch of salt because history suggests otherwise. Exit polls have not been accurate for the last three national elections. Yes, to some extent they tell us the direction of the wind.

In 2004, exit polls wrongly forecasted BJP-led NDA coalition winning again, while in 2009, they meaningfully underestimated Congress-led UPA's seat share, UBS said in a report.

"In 2014, while exit polls correctly predicted a BJP-led NDA victory, they significantly underestimated the margin of victory. Markets will watch these results closely though and there could be some impact," it said.

What should investors do?

Volatility is likely to rise on Monday, and in the past elections, exit polls were the major source of indication of results and so market's movement was more correlated to them.

"We have been advising investors to hedge their portfolios with buying put calls on NIFTY. At present due to volatility, options are trading at a big premium and this makes them less attractive now," Abhijeet Bajpai, co-founder, Avighna Trades told Moneycontrol.

"We advise investors to book profits/exit on market heavyweight shares for now and stay light for the election result day. In case of large downslide in the markets they can buy into quality midcaps or stay in cash," he said.

Ritesh Ashar, Chief Strategy Officer, KIFS Trade Capital told Moneycontrol that investors having a huge equity portfolio can hedge their risk by buying Put options.

"This is the best way that they can minimize their losses as well as the risk of losing the most in such a volatile condition. One can simply buy Nifty 11,000 Put near Rs 174 for the lot size of 75 each in a quantity according to their portfolio," he said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

 


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First Published on May 19, 2019 09:24 pm
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