Set for freaky Friday

May 12, 2014, 08:20 IST | Arun Kejriwal

With May 16, the D-Day for the poll results, around the corner, markets are showing signs that they are all set for a new government to come to power

The markets did virtually nothing for the first four days of the last week and were down on a net basis. Last Friday they went berserk after a leaked exit poll found a clear majority for the opposition alliance, which is what the markets have been rooting for.

Whom India has chosen to lead the country will be known soon. Pic/AFPWhom India has chosen to lead the country will be known soon. Pic/AFP

Election fever
The BSESENSEX gained 590.34 points or 2.63 per cent to close at 22,994.23 points. The Nifty gained 164.00 points or 2.45 per cent to close at 6,858.80 points. The BSE100, BSE200 and BSE500 gained marginally lower at 2.37 per cent, 2.25 per cent and 2.15 per cent. The BSEMIDCAP gained 1.34 per cent while the BSESMALLCAP gained 0.81 per cent.

The sectoral gainers were few wiled by the BSEBANKEX which gained 7.02 per cent, followed by BSEOIL&GAS up 5.73 per cent. Other gainers included BSECAPGOODS up 5.54 per cent and BSECONDUR up 3.02 per cent.

The losers were led by BSEIT down 3.02 per cent, BSETECK down 2.85 per cent and BSEHEALTHCARE down 1.68 per cent. Incidentally all these three indices are considered to be safe bets in case the rupee depreciates, and are the contrarian bets.

The market sensing a stable government and therefore a stable rupee is becoming less risk averse, and hence this situation. In individual stocks Hind Petro gained 10.20 per cent, ICICI Bank 9.82 per cent, Yes Bank 9.11 per cent and Hindalco was up 8.70 per cent.

The losers were led by Bharti Airtel down 4.81 per cent, Lupin down 4.36 per cent, HCL Tech down 3.86 per cent and Infosys down 3.57 per cent. Financial Technologies was down 12.57 per cent after the fate of the company became uncertain when its founder Jignesh Shah was arrested and sent to jail in connection with the NSEL case. Group Company MCX lost 6.29 per cent.

Foreign affairs
In international news, the Dow closed at 16,412.71 points a gain of 89.65 points or 0.55 per cent. The Dow has been hovering around the same levels for some time and technically the markets are set for a breakout or breakdown in the coming days.

In India FIIs continued to be buyers and bought equity worth Rs 2,349 crore for the week of which more than half was on Friday itself. Domestic institutions have turned neutral and sold paltry Rs 3.80 crores for the week. The Indian rupee gained a tad and closed at Rs 60.04.

Today is the last day for the current elections. Exit polls will begin on May 12 evening. Markets would react to these exit polls on Tuesday. However, unless the other exit polls are of a completely different opinion, there would be no impact on the markets.

Markets are likely to be impacted significantly if the polls indicate a majority for the Bharatiya Janata Party, or if the opinion is that they along with the alliance would fall short significantly of the majority. It is not as significant whether they win 230 or 250 seats but that they are the largest party and form the government. The bigger problem is if they get significantly fewer seats, and then who wins them.

What next?
What next is the question on the minds of investors? Which way would the markets behave? I believe the upside in the immediate short term may be capped at a best 7-9 per cent rise from here. What should an investor do?

If one has short term positions and they are giving good returns, some money must be taken of the table. If you are an investor and have taken fresh positions since September 2013, profits would be there all around you, and again booking some would be advisable.

In the long term things look much better and the possibility of this being the beginning of a new bull run lasting around three years looks likely. My advice to investors is invest wisely, the time has come to be in the capital markets.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website

Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.

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