Here's how experts view the impact of state Assembly election results on markets

BSE building

Prashant Khemka, Founder, White Oak Capital, and Gautam Duggad, head of research at Motilal Oswal Financial Services, spoke to Moneycontrol on the impact of the state Assembly election results on the stock markets.

Reacting to the Bharatiya Janata Party (BJP) win in four out of five states, Prashant Khemka said Indian markets keenly watch the outcome of the results and will get a boost as political stability is required. However, the impact of the results is short-lived, given larger issues such as geopolitical tensions and inflationary pressures amid higher commodity prices and input costs, he added.

"The election events do not have a long-term impact on the values of companies. If the market believes any event is transitory, it is not going to have a big impact. If there are supply chain disruptions because of geopolitical situation, it matters to markets," said Khemka.

On the other hand, Gautam Duggad said the outcome of Assembly polls and the return of the BJP is good news for the markets, and the mandate has set the stage for the government to pursue more reform measures.

"Results augur very well for markets. Stability. Continuity. And hopeful there will be further reforms push now. These results give strength for incumbents to pursue reforms agenda. The margin of victory is also so huge. This is the first time an incumbent CM is coming to Uttar Pradesh after three decades," Duggad stated.

Sharing his outlook on inflation concerns and what is in store for the markers in the next few months, Khemka indicated that though high oil prices have heightened concerns about inflation and growth, they won't lead to a bear market now.

"Inflation has an effect on Bond yields, which are not moving that high for long. But, because of inflationary pressure, we are not going to have a bear market," the expert noted.

On being asked about inflation in the near to medium term, the market expert said, "Markets factor in inflation before people start worrying about it. Most companies will pass on rising input costs on raw materials."

Reacting to a relentless spike in commodity prices, and on the subject of how earnings of companies are going to be in Q4 and in the next three months, Gautam Duggad said Motilal Oswal has cut earnings estimates in auto, cement, consumers, and at the same time raised estimates in metals and in oil & gas.

'In the last few days, according to commodity prices, we have cut out estimates in auto, cement, consumers, and raised estimates in metals and in oil & gas," the expert mentioned.

"In the last 8-9 months, we have seen many changes due to the Covid situation. There were supply chain disruptions. Localized lockdowns, Second wave, and third wave lockdowns were there. Despite the market taking the hit, earnings have been extremely resilient. Earnings have been stable," he said.

The expert noted that IT stocks have repeatedly performed better and stayed resilient even in uncertain times, considered this sector an investment pick for them as it helped investors gain an edge.

"The demand visibility is excellent in IT. Cash flow generation is massive. This is being returned to shareholders in terms of dividends or share buybacks. This makes IT resilient. This is the reason there is not much fall in IT stock," said Duggad making his bets over IT stocks.

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