Uttar Pradesh can be seen as a state with a population close to that of the country Brazil, one that is next to Britain in land area and close to Lesotho in poverty. It is a state full of diverse cultures, languages and castes and always catches the attention of the entire nation when it comes to elections.
Confidence, commonly called “sentiment”, is what drives the markets. Confidence, is also what often fuels up the economy. The more commonality that can be established between the state and central government that is the number of states coming under the rule of the same party as the one at the center, the more confidence will be generated among the investors regarding the market in question. This is exactly the phenomenon that investors are bidding on to expect the market to break its major resistance levels of 9000.
The political situation in the pre-election period has been very turbulent. With the ruling of the Samajwadi Party under Chief Minister Akhilesh Yadav going for a collaboration with Congress under the leadership of vice-president Rahul Gandhi, the result has given the political picture of UP in a different sets of colors. But this strategy has not really worked in the final result. The ruling justice and development party grabbing insignificant numbers, the BJP posted a 300+ victory, becoming the first party to generate this huge number in the state in last 40 years.
All of this adds up in giving our country a uni-directional progress authority, which reflects a single party and gives the notion of comparatively easy implementation of reforms and changes. Faster the reforms can be implemented the more people will be confident about progress and more the confidence in potential progress, more will be the investment in the market. In the present circumstances, the market will enjoy a holiday on 13th March 2017, which is expected to cushion the euphoria all the more.
Saffron wave has swept off UttarPradesh and Uttrakhand and with the massive victory of BJP, investors have cheered up with Indian stocks opened up for trading on 11th March 2017.The victory suggests that the general public did support the tough stand taken up by the Prime Minister to invalidate 86% of the country’s currency notes in November.
The positive sentiment around the quick and speedy implementation of GST and the one developing around to have the similar state and central government have helped Indian stocks rally at a time when corporate earnings growth are not doing well. This year, the Sensex and the Nifty have gained around 9 % with each turning out to be slightly better than the 7.4% gains for MSCI Emerging Markets Index.
However, any rally based on election results would most likely to be short-lived according to analysts and they have cautioned against letting the sentiments loose into the markets and buying heavily. Post any short-term movement, the markets would likely come back to the usual trajectory, and would continue to be guided by the fundamentals, such as progress of the economic reforms.
The exit polls on 9 March 2017 did talk about the victory of BJP in the assembly elections in UP as well as Goa, Manipur and Uttarakhand but the stock markets did not rely on the same.
Although the BSE’s benchmark Sensex rallied briefly, little changed as investors set their sights on the actual poll outcome.However, the rupee, strengthened to a four-month high, closing 0.2% higher at 66.61 against the dollar on 10 March 2017.
The victory will also breathe in air to the rally when it is more or less certain that the US Federal Reserve will hike interest rates when it meets on 14th or 15th March. Higher US interest rates will make the dollar stronger and the emerging market assets less attractive. Foreign institutional investors have pumped in $2 billion so far this year after withdrawing $4.6 billion in the last three months of 2016. Some experts have also cautioned about rising valuations and the fact that this rally has been entirely driven by easy money.
Market under most possible circumstances will get a push beyond 9000 levels, which was last seen during the Lok Sabha elections. But as we have seen in case of Brexit and Trump victory market tends to move off the incident at a quite fast pace. The next big events that market might be looking at will be Federal Reserve action on rates and the March Quarterly results which will decide the sustainability of the probable new levels.
Categories: Story Of The Week