Traders say may fall for one-two days if Delhi elections results are in line with exit polls; weak corporate earnings will also weigh
Stock markets may fall in a knee-jerk reaction today as exit polls on Saturday predicted a clear mandate for Aam Aadmi Party (AAP) in New Delhi assembly elections in a straight battle with the BJP.
In a continuous six-session fall, the Sensex has dropped 3.36%, or 964 points, since January 29, and may continue the slide for one-two days if the results are in line with the exit polls, market analysts said. Over last few days, there has been an increased level of anxiety among the trader community regarding the impact of the Delhi assembly elections on the bourses, they said.
All the exit polls barring one have predicted an outright victory for AAP, with one poll giving the resurgent party as high as 53 out of the 70 assembly seats in Delhi. One exit poll, however, gave BJP 35 seats, one short of majority.
Jagganadham Thunuguntla, head of research, Karvy Securities, said, "If BJP loses in Delhi elections it will be against the popular expectations of the market."
It may also lead to an emergence of a party which is likely to announce populist measures that will affect the deficit situation.
AAP chief Arvind Kejriwal had ordered an audit of the power distribution companies, post AAP coming to power post the elections in December 2013. This had sent the stocks of companies like Reliance Infrastructure and Tata Power into a tizzy.
G Chokkalingam, managing director and founder, Equinomics Research and Advisory Pvt Ltd, said Delhi elections won't change the scenario in national politics as it sends only three members to Rajya Sabha. "Rather weak corporate earnings and lack of liquidity will be a logical cause for a correction in the market." he said.
The election for Rajya Sabha MPs from Delhi will be due in 2018 and in 2016 there will be Rajya Sabha elections for 73 seats which include states like Maharashtra and Haryana in which BJP and its allies have a majority. The recently announced results of companies like Tata Steel and Tata Motors have been below the street expectations. The banking results have also reflected stress in the asset quality of the major banks, especially the public sector players.
The Reserve Bank of India's decision to keep the repo rates unchanged at 7.75% in its bi-monthly monetary policy review on February 3 has also had a negative impact on the markets. The advance tax payments due on March 15, and the recently announced rights issue worth Rs 15,000 crore by the State Bank of India (SBI) will lead to a transfer of liquidity from the markets.
Kunj Bansal, chief investment officer, Centrum Broking, expects, the next triggers for the markets will be the revised consumer price inflation and wholesale price inflation numbers and the revised GDP growth numbers. "The soon-to-be-announced SBI and L&T numbers will be in line with expectations'' he said.
Thunuguntla of Karvy said just anticipation won't be sufficient and action is needed to be taken by the government in terms of policies.
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