Moneycontrol Pro Panorama | Back to brass tacks as exit polls allay investor fears

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The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.
The weekend brought a sigh of relief to the Street as fears that appeared to have led to foreign investor selling proved unfounded. If the exit polls have got it right, that is. There appears unanimity among the major exit polls that the Narendra Modi-led NDA is poised for another 5-year term with a clear majority at the helm of the fastest growing large economy.

The News18 poll gives the NDA 355-370 seats with a vote share of 40 percent while INDIA is estimated to get 125-140 seats with a vote share of 20 percent. Stock markets greeted the news by marking the Sensex up 3.11 percent to 76261 points as of 12.40 pm. While this is a healthy increase, the Sensex had reached 75400-levels in the last week of May and subsequently declined. Compared to the end-May levels then, the increase is much smaller. What it shows, as of today, is that the Street had been pricing in a victory for the NDA government, and while some doubts may have set in, they have now been dispelled.

What could happen tomorrow when counting is scheduled may be a question on investors’ minds. If the actual results broadly match the exit poll results, then it should be business as usual. But a wide variation from these numbers, either in favour or against the NDA, could see a sharp move in markets. The more significant move will take place if the verdict proves to be weaker than what the exit polls’ consensus is. However, in the long run, it does not really matter as one day’s movement should not make a difference to how you plan out your investments over the years.

Once the market’s reaction to the verdict is done and dusted, its attention will return to the basics. The full Budget will be a matter of interest but the interim budget’s numbers had already reassured markets of the government’s intention to stick to fiscal discipline. Therefore, unless the government rolls out any major reforms or tax-related measures, aided by a better than expected election verdict, it may not have an outsized impact. My colleague Neha Dave’s analysis of the exit polls’ outcome sketches out the various scenarios for investors that could play out post-exit polls.