Markets may see wild upswings amid final vote tally, but policy continuity is the focus: A Bala

A Balasubramanian, independent market analyst

Market expert A Balasubramanian expects no significant negativity in the markets even if NDA's final vote tally falls below exit poll estimates. However, he added that no surprise rally might also be witnessed for the next few sessions due to inflated valuations.

So far, the NDA has secured around 295 seats, below the average exit poll forecast of 370 seats. Conversely, the opposition I.N.D.I.A coalition has gained around 209 seats, significantly above the exit poll prediction of 140 seats.

This gap has dampened investor sentiment. On June 4, in early trade, the Sensex plummeted over 2,000 points, while the Nifty dropped more than 600 points amid heightened volatility.

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While market upswings are expected to continue, A Balasubramanian stated that participants would primarily focus on policy continuity, strong fundamentals, economic momentum, stable inflation, indigenisation efforts, and GDP growth.

"Since the Indian market has been trading at relatively higher valuations than the other global counterparts, the final vote tally results may break the rally in markets. But the final outcome is still awaited, so nothing can really be laid out," he expressed.

Bala explained that whenever market has given excessive return historically, a period of consolidation takes place in the market as earnings and valuations get digested. However, this wouldn't mean that the growth momentum of India will get lost.

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"Overall, we believe that the positive bias is expected to remain in place. A consolidation in market would mean that when a good market happens, we won't hesitate to rise again," he added.

Answering question on whether there will be enough cash flows in the market, Bala doesn't see any big issue flaring up. He believes an aggregate Rs 40,000 crore cash to be present, while Rs 30,000 crore will be injected into mutual funds.

"We expect to see incremental flows coming in as NFO collections remain strong. Enough cash will be there for mutual funds to participate if at all there is any kind of pressure at the prices. On an aggregate basis, about 4 percent to 5 percent kind of cash level could be there for the entire mutual fund industry," Bala said.

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